Contractors within the aviation industry amongst others are in shock over chancellor of the exchchequer Philip Hammond's proposal to tax all contractors as employees operating within the private sector.
There has been speculation within various newspapers that the Chancellor would push out changes that he introduced in the public sector in April to the private sector in 2018.
CAS Recruitments MD Stephen Wilkinson has always held the view that when the revised IR35 legislation was rolled out to the public sector, the private sector would be forced to follow suit shortly thereafter.
The Budget Leak Proposals.
The big deciding factor on determining if a contractor fall's inside or outside IR35 has been who has supervision direction or control.
Under the leaked proposal HMRC will put the onus on the client company who hires the contractor to decide the contractors IR35 status and if they get it wrong the client will be punished with heavy financial penalties.
Mel Stride the financial secretary to the treasury said in an interview with the financial times this week
Stride said efforts to improve compliance in the public sector since the reforms were enacted appeared to have had a significant impact, with 90,000 additional workers being taxed as employees in the first three months. “The public sector has undergone a behavioural change, which means we are seeing far fewer [workers] offer their services through service companies, and yet the private sector is able to carry on with that behaviour unchecked,” he said.
Extending IR35 into the private sector would remove the disparity between the sectors that some public sector employers feel is unfair.
The cost of non-compliance in the private sector is estimated to rise to £1.2 billion a year by 2022 as more people choose to sell their services through companies.
Mr Stride went on to suggest that the government would not be deterred by opposition from employers.
How will this effect contractors in the private sector?
If we take a look at the impact this legislation had on the public sector it will give us a good indication of what you can expect.
When this revised ruling on IR35 was rolled out to the public sector HMRC produced a new online assessment tool called the IR35 test and although this test has no basis in law, government departments utilised this tool to determine whether a contractors are inside or outside of IR35.
The result has been that the vast majority of government departments such as HMRC and the NHS to name but a few have taken the extraordinary step of no longer hiring personal service contractors. Those that are already engaged by government departments had to abandon their personal service companies by April or their contracts would be terminated.
The only logical conclusion we can draw from the above is that private business across the UK will not be willing to take the risk of huge financial penalties, prolonged costly investigations and possible legal action from HMRC.
What can you do about it?
Contractors should spread the word making sure everyone knows what is likely to happen, you can do this by liking commenting and sharing this article on social media or sending this to contractors you know via e-mail.
Time is extremely short, lobby your MP in order to have this decision reversed. According to the leaks this will be proposed in the Autumn budget on 22nd of November 2017 and take effect in April 2018