New IR35 fintech sector threat warns Pandle. HMRC launches consultation to impose costly changes on private sector
- 26.06.2018 08:12 am
Pandle (www.pandle.co.uk), the cloud bookkeeping software provider for the self-employed and microbusinesses, warns contractors and the companies that while HMRC says “the government has made no decisions about how to proceed”, the consultation is accompanied by reports and factsheets giving a rosy view of the impact of its previous changes to IR35 in April 2017 which caused considerable disruption.
“HMRC is preparing to impose the same compliance rules on the private sector as it did a year ago in the public sector unless there is a strong challenge” warns Lee Murphy, the CEO and founder of Pandle.
Pandle is urging businesses that use contractors, as well as contractors themselves, to respond to the consultation before it closes on Friday 10 August 2018. People can read the consultation and respond by clicking here.
Lee Murphy, an accountant and tech entrepreneur, adds: “The tech sector is growing rapidly to be a very important part of the UK economy and we are particularly a leader in financial technology, a key area if we are to develop the businesses of tomorrow. The use of highly skilled contractors is very much part of this success, and my concern is that HMRC will arrive wearing clumsy boots and stamp all over this with lots of bureaucracy in the name of better compliance.
“HMRC estimates that only 10% of contractors properly comply with the existing rules and says this costs the Exchequer hundreds of millions of pounds each year. It is hard to know where such figures come from, but I can’t help thinking a lot of alleged non-compliance would come from its rules not being straightforward, so a tidying up would certainly be welcome.
“However, the big likelihood is that HMRC is gearing up to impose the same heavy-handed approach on the private sector as it did in the public sector last year, whereby organisations were effectively made responsible for policing the compliance of their contractors and also made liable for any non-compliance. The upshot of this was that contractors were compelled to work under umbrella companies if they wanted to continue with public sector clients, adding costs and bureaucracy”.
Lee Murphy said: “Contractors tend to be highly skilled and valuable people so HMRC should be making it easy for them to setup a business and run it properly with well-defined rules around IR35 so they are clear what constitutes contracting and at what point HMRC considers it disguised employment.
“Similarly, we should not have the case that employers are made liable for any non-compliance by their contractors. Beside putting many from wanting contractors, it is a huge extension of employers’ culpability for the actions of third-parties, and is analogous to deciding that employers should also be liable for income tax self-assessment errors by their employees!
“The issue we have seen is that the rules are not black and white and are continually re-defined by case law. This means contractors have a lot of uncertainty about the risk around IR35 and how they should be operating. In the worst cases it puts potential contractors off completely or, at best, causes confusion and cost. It is this that HMRC should be tackling rather than making sweeping changes that add burdens to contractors and businesses alike.”