Recruiters push for IR35 reform delay to avoid ‘damaging’ growth

Reed, one of 14 recruitment firms to write to the Treasury. Photo: Shutterstock

Recruitment firms are pressing for the government to delay introducing private sector IR35 tax changes until 2021, which they say will enable businesses to better understand the legislation and avoid further work being taken overseas.

In a letter to chancellor Sajid Javid, 15 organisations say the changes to off-payroll working rules require a “far more extensive rethink” than the review announced by the government earlier this month.

The government has confirmed its review would not look at changes to the new IR35 tax rules. It is expected to conclude in mid-February, with the final legislation confirmed in the Budget the following month.

Delaying the changes by a year would give sufficient time for the new rules and their impact to be looked at properly, they suggest, and for the government to make any necessary adjustments.

The letter says: “Compliant companies won’t have enough time to understand all the legislation given the significant delays that have taken place. Through no fault of their own, they will have insufficient time to work with their clients to get the approach right.

“We are already seeing examples of projects being binned and work taken offshore, damaging growth here – and ultimately, the tax take.

“Making any necessary changes in 2021 would give space for a more detailed review and also grant government sufficient time to implement any suggestions from it – including effective enforcement. The current timetable leaves only 17 working days between the publication of final legislation on March 11 and implementation on 6 April.”

The letter has been signed by the chair of the Recruitment and Employment Confederation and 14 bosses from major recruitment organisations including Reed, Adecco, ManpowerGroup and Hays.

It recommends that:

  • An independent chair and body is appointed to lead the review: “This would enhance the legitimacy of the government’s final position and win business confidence,” the letter says
  • The government assesses how public sector organisations were affected by IR35 reforms in 2017: “There is much evidence which shows there are ongoing issues with the public sector reform. These problems need to be fixed before any changes can be implemented in the private sector”.

REC chief executive Neil Carberry said the changes as they stand will “punish ethical businesses, harm workers and provide the environment  for non-compliance to thrive”.

He said: “It’s always good to see further opportunities for engagement opening up, so we welcomed the review. But without a delay to implementation real change is impossible.

“We need to get the rules right, deliver on regulation for umbrella companies and have proper enforcement in place before pressing go… Delaying will allow MPs to properly take stock of the impact the legislation will have.”

12 Responses to Recruiters push for IR35 reform delay to avoid ‘damaging’ growth

  1. Avatar
    Tim 22 Jan 2020 at 11:30 am #

    Can you publish the full list of agencies that are requesting a delay?

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    Peter 23 Jan 2020 at 5:04 am #

    Contractor’s are a small proportion of the labour market and are the diversion in this campaign. IR35 creates a new class of employee and over time businesses will use this.

    • Avatar
      Gary Horton 23 Jan 2020 at 11:35 am #

      You are wrong Peter big and small companies rely heavily on the contractors as they can hire and fire as and when order books are full, so the big companies will lose out.

  3. Avatar
    Tim 23 Jan 2020 at 8:42 am #

    It’s almost certain that chaos will ensue post 5/4/2020.

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    Daniel Diaconu 23 Jan 2020 at 9:37 am #

    They are pushing workers to umbrella companies which are an abomination 😠

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      MarkH 23 Jan 2020 at 6:58 pm #

      Agreed Daniel…as a small Interim management and consultancy. I am expected to pay PAYE (for IN SCOPE IR35 work)…I am also expected to pay an umbrella company for the “privelage”… up to 10% in spite of the fact I have my own accountant.

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    Ronnie 23 Jan 2020 at 10:07 am #

    Thought this government were committed to making people richer, not poorer!

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    Chris Tsitlakidis 23 Jan 2020 at 11:03 am #

    This government will ruin what is left from economy. We know thr IR 35 for two years now, we ve seen tax and Ni intake 70 percent, income collapse, bank refusing to lend money anymore, AND THE ONLY CASH LEFT IN OVERDRAFTS., NOW CHARGED WITH INTEREST RATES 40 PERCENT!!!!!!!!!! THERE WILL BE NO ECONOMY LEFT AFTER THAT.

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    LMc 23 Jan 2020 at 12:56 pm #

    Why are umbrella companies passing on the cost of Employers NI to employees?
    This looks to be in breach of current legislation?
    Has anyone found a FSA and HMRC compliant umbrella company who is not deducting Employer NI as so called ‘Employment costs’ in the umbrella company illustrations and in pay?

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    Saqib 24 Jan 2020 at 3:38 pm #

    5 Million self employed not a small proportion of the work force. It will have a trickle down affect on every sector in this country as it will affect 5 million house holds means on an average of 3 persons per house hold make it as 15 million affected people.

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    Saqib 24 Jan 2020 at 4:08 pm #

    Why the self-employed risk taking earners should pay the Employer NI from their own pocket to an umbrella company, which is a significant amount at @14% of their pre-tax revenue. As far as Employee NI and Tax is concerned that is justified but paying Employer NI from your own’s pocket without having any Entitlement to (Holiday pay/Sick leave pay/Private Medical/Company paid skills upgrade trainings/car Allowance/3 months of Paternity pay/Maternity pay) is just like ruining yourself.
    It will prove to be a disaster for the economy mind my words if implemented in private sector without a proper well thought legislation and until Govt. will reach that point of correction after its implementation most of the highly skilled flexible work force would migrate and many companies will outsource their business leave unemployment in the local market and its not what will happen in future, its what has already started 6 months ago. Many have gone and remaining will move after with their plans in the pipeline.

    If still interested to implement in April 2020, then one step might counter the damage to the industry from collapsing and making it easier for both Resource, resource supplier and End Client, the common pint according to my analysis is “Employer National Insurance”. If Govt, removes the ERNI which will boost contractor’s earning by £ 600-1200 per month as per individual’s day rate, can be a contributing factor.

    It’s a suggestion as per my analysis looking at all three parties involved i.e Resource, Resource Provider and End Client.

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    Timewarp 18 Mar 2020 at 5:50 pm #

    It is noted that contracts in the 1st/2nd week of January 2020 had a boost, but many positions were in Switzerland, Austria, Sweden, Denmark and Belgium. UK contractor hiring went onto a freeze, or tried to go “inside IR35” and we had the biggest fall in UK economic confidence among clients who rely on contractors to complete impossible jobs and consequently contractors bank balances started to go into the red and stay there. Clients projects started to fall behind by months – (GOVERNMENT … we do not GET FREE HOLIDAY, OR SICK LEAVE, AT CHRISTMAS WE ARE NOT PAID AND WE HAVE NO CONTRACT JOB SECURITY.) This downturn predates the virus by months because it is so toxic: it has this negative effect despite IR35 “NOT YET” being in effect. Add the virus to that and we are in deep s**T. Now the government “postpones” IR35 until 2021. What, do you even know that IR35 has pre-virus damaged the economy already, well before coming into force? The mere anticipation of IR35 was like anticipating CORONA INFECTION IN YOUR BUSINESS. 15 million Brits families affected by the IR35 negative effects.

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