The Treasury have published their response to the House of Lords Finance Bill Sub-Committee’s report on Off-Payroll working. For many, the response will come as a disappointing yet unsurprising rehash of worn out rhetoric. While some of the issues highlighted by the Lords are acknowledged with vague promises, the response offers no concrete solution on fundamental issues such as CEST, blanket ruling and worker’s rights. 

On the subject of their much-maligned status determination tool, the Government flatly denies accusations that it’s not fit for purpose. They claim that the tool has been “rigorously tested against employment status case law”, despite conclusive evidence that CEST neglects to consider crucial aspects of employment law such as mutuality of obligation. The Government’s inadequate understanding of this area and its importance was once again highlighted by their recent defeat in the PGMOL case.

In the case of blanket assessments, the Government refutes that the widespread PSC ban constitutes ‘blanketing.’ They argue that this can be attributed to businesses reassessing how they engage contingent staff. This disingenuous response fails to acknowledge that companies who adopt a ‘no PSC’ policy are simply acting to reduce their IR35 liability. This is in direct response to findings by the Lords review that HMRC’s guidance for businesses on the reforms has been confusing and inadequate.

In fact, the PSC ban is by far the most damaging example of blanketing under the guise of ‘company policy,’ as it forces contractors out of their limited companies and onto the payroll without proper recourse or justification. These arrangements are often compounded by further practices that work in the hirer’s favour, while compromising the contractor’s rights. For example, the unlawful deduction of the hirer’s employment taxes from contracting rates is common practice.

Some businesses also choose to stipulate that contractors must use their outsourced recruitment agency’s PAYE. Contractors have been asked to sign new contracts agreeing to reduced rates or reduced ‘zero hours’ arrangements, or face being offboarded. Most recently, Royal Mail and its subsidiary Angard Staffing lost their Upper Tribunal appeal against a decision that agency workers for Royal Mail are entitled to the same employment rights as other Royal Mail employees.

The question of forcing contractors into ‘zero rights’ employment was raised in the Taylor Review in 2017, and was also central to the recent Lords Review. However, the Government’s response could be seen to throw contractors to the wolves, when they state that: “Organisations are free to decide how to structure their workforces and how to engage workers. However, the unfairness of contractors paying less tax than employees when their engagement meets the test of an employment relationship is a long-standing problem that the Government cannot delay addressing any further.”

The Government goes on to promise further independent research into the long-term effects of the public sector reform, which it intends to make available before April 2020. However, as one off-payroll critic commented: “For Government to publish research at a stage where it is too late to act upon any of its findings is baffling.” Even more disturbing is the recent revelation that Boris Johnson and Rishi Sunak both stepped in to ‘influence’ MPs against voting for the Finance Bill amendments that would have delayed private sector IR35 reform until 2023/24.

A leading contractor website recently reported that the Chancellor and the PM personally intervened to ask MPs not to vote for amendment 20. This explains why the amendment failed, despite enjoying widespread initial support. In letters sent to MPs, Sunak and Johnson ask them to effectively disregard overwhelming advice from the House of Lords Economic Affairs Committee. Yet, as one MP admitted, his decision not to vote for the amendment wasn’t about being persuade that IR35 reform is right, but about securing future favour with the PM.

This content has been supplied by IR35 Guru

Contractors and businesses are now advised to use the remaining time until April 2021 to prepare for the changes ahead. If you’re looking for more information on IR35 our free comprehensive guide gives you a clear overview of the legislation to date. Umbrella Exchange has a range of options to help you keep your contracting career on track. To talk to a member of our team, call: 0203 393 3881