Experts Urge Private Sector Recruiters to Prepare for the Expected IR35 Extension Aug 14, 2018Views: 204
Recruiters in the UK are busy preparing for the expected extension of IR35 working rules. The government’s IR35 consultation closes on 10th August 2018. It’s expected that the controversial non-workers tax rule will be extended to the public sector.
Harvey Nash – a recruitment and outsourcing services in the UK – has changed its business model in line with the expected regulatory changes. Last year the company had bought Crimson Digital. According to the CEO of the company, Albert Ellis, the company is now focused on a 50/50 split between outsourcing and recruitment.
He said that companies are now looking at outsourcing their work. They don’t want to meet staff shortage without having to deal with IR35. He said that contract work won’t disappear. Instead, it will likely morph into project-based outsource work.
The CEO and chairman of Antal International, Tony Goodwin, has also said that his company is preparing for the IR35 changes. He says that the extension is inevitable, and companies need to prepare for it.
He says that IR35 will hit hard on the contractors, particularly higher paid ones. The extension of the rules will probably lead to contract workers moving abroad. Some companies may also ditch contract work altogether.
The tax advantage and flexibility have the main incentives for independent contractors. Things will change for the worse for contractors after the IR35 extension. This may result in the contract workers look for alternatives.
The flexibility has been the main driving force in the British labour market. According to Goodwin now the government is taking away that freedom. This in addition to the expected Brexit next year is not good news for the contractors.
Adrian Marlowe, the chairman of the Association of Recruitment Consultancies, also opposes the IR35 extension. He claims that the IR35 tax reforms necessarily penalises contractors and hiring agencies. The issue of non-compliance should be addressed. But this is not the IR35 reform is not the right way to address the problem.
About the IR35 Tax Reform
The government had introduced the IR35 off-payroll working rules in April 2017. The rules required public sector companies to determine the employment status of off-payroll workers. This has resulted in a lot of confusion with many contractors wrongly placed inside IR35. In case the worker is caught inside the IR35, the recruitment agency had to deduct income taxes and employer’s NI.
The government is now considering an extension of the rules to the private sector. Experts suggest that there is no use raising voices against the tax rules. Companies need to understand the consequences and proactively prepare for the changes.
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