Are the changes announced just the first phase and what more can we expect?
On 14 March David Gauke said: ‘The government is considering responses to the discussion document published last July on how to improve the effectiveness of the existing intermediaries’ legislation (IR35). As set out in the discussion document, the government’s objective is to find a solution that protects the Exchequer and improves fairness in the system without creating disproportionate burdens on businesses.’
This is what was said in the discussion document issued in July: ‘The government, therefore, wants to consider options to reform the legislation with the following objectives:
the need to protect the Exchequer
levelling the playing field between those who are employed directly and those who would be employed directly if they were not operating through their own company.
Making the legislation as straightforward to comply with as possible – and not creating disproportionate burdens on businesses or individuals – will be core principles in designing any change. It is also not the government’s intention to widen the scope of IR35.’
The government also said before the above ‘many PSCs would not fall within the legislation because the worker would properly be regarded as self-employed’.
Julie Deane, in her report to government on self-employment, highlighted that the ‘lack of a formal definition of self-employment should not be an issue for individuals seeking to set up their own business.’ She suggested that ‘The description of “self-employed” applies to a wide variety of individuals and sectors and there is currently no clear understanding of the employment status within many of these groups. The lack of a legal definition of self-employment is causing an issue. Simplification and clarification with a single definition for tax and employment law is desired and should be considered.’
With evidence and calls from business what did the chancellor decide? The decision was made to reform IR35 legislation for public sector engagements – by moving the liability to pay the correct employment taxes from the worker’s own company to the public sector body or agency / third party paying the company. HMRC will also work in partnership with stakeholders to develop a new tool that will make the decision on whether or not the rules should apply as simple as possible and provide certainty. This will be following consultation in the Finance bill 2017.
The public sector is defined under broad categories (this is not an exhaustive list):
government departments, legislative bodies, armed forces
schools and further and higher education institutions
other public bodies (listed in a schedule including bodies such as The British Museum, BBC, Channel 4)
publically-owned companies (wholly owned by the Crown and/or the wider public sector such as Transport for London).
The chancellor has sent out a message that for public sector engagements it is those who engage the ‘worker’ who will be responsible. So no legal definition – just more information to gather for these entities and those with whom they do business.
It is a long way from the simplicity that is needed!