Surprisingly the Chancellor’s speech made no mention of IR35 or off-payroll reforms being extended to the private sector, however it was included in the “red book” where he commits to a “careful consultation” on how to tackle non-compliance in the private sector. This is fantastic news and shows that the Government has finally listened to FCSA’s many concerns regarding the public sector changes already in place, their devastating impact on the public sector and increase in non-compliant schemes that have resulted. It is very positive that the Government has not simply bulldozed ahead with legislation that would have a negative impact on the flexible workforce and the UK economy as a whole.
We are pleased that the government recognises that employment status is an important and complex issue, and will be exploring options for longer-term reform making employment status tests for both employment rights and tax clearer. This is positive providing that it will be a genuine and meaningful consultation, and that stakeholders will be listened to. FCSA has a great deal of expertise in employment status and tax status, and we campaigned against HMRC’s online tool “Check Employment Status for Tax” because it ignores a key element of IR35 case law, that of mutuality of obligation. Despite this glaring omission HMRC continue to believe that their tool does give accurate results, and we will continue to campaign against this, and we hope that the wider consultation will result in a better, more accurate tool. Work patterns are changing and we are seeing a growth in non-traditional employment that is going to continue as more people choose to shun permanent employment in favour of working for themselves. This structural change to the UK workforce requires a structural change to the regulations not knee-jerk changes driven by tax collection, and for that reason we welcome the opportunity to explore options for longer-term reform.
We were also extremely pleased that there will be no knee-jerk reaction to lower the VAT threshold following OTS’s recent report, due to the impact on small and micro-businesses, including professional freelancers. It is essential that we do not disrupt the economically important army of highly skilled contractors that provide necessary services to businesses, and we welcome the Chancellor’s plan to consult on whether the VAT threshold could better incentivise growth.