Recent research has found that 80 per cent of limited company contractors do not believe that HM Revenue & Customs (HMRC) understands the potential negative impact of the IR35 reforms that will come into effect in April next year.
The research also found that most contractors do not believe HMRC’s claim that public sector IR35 has been successful, and think that the taxman’s assertion that private sector IR35 reform will not harm genuine personal service companies (PSCs) is misplaced.
The IR35 payroll reforms came into force in the public sector in April 2017, and the Government announced last year that these changes would be rolled out in the private sector in April 2020.
The contractors surveyed are also concerned about clients’ knee-jerk reaction to the reforms and role-based blanket rulings that are wrongly enforcing self-employed contractors to be taxed as employees.
According to HMRC, role-based blanket determinations are not widespread in the public sector, but evidence would suggest otherwise. For example, critics would argue that HMRC has forced blanket determinations onto NHS trusts, but HMRC has said these are ‘appropriate’.
Critics are also accusing HMRC of sending mixed messages, pointing to a recent letter sent to GlaxoSmithKline (GSK), which has suggested that 1,500 people working in hundreds of different ways there should all be classed as IR35.
However, a spokeswoman for HMRC refuted that the contractors at GSK were working in hundreds of different ways, saying that it is fair that two people working like employees broadly pay the same tax and National Insurance, even if one of them chooses to work through a PSC.