Following amendments made to the IR35 aspect of the Finance Bill last week, ARC has written to MPs, drawing to their attention to some of the most important anomalies in HMRC’s approach.

Adrian Marlowe, chairman of the Association of Recruitment Consultancies (ARC) said, “Although we welcomed the amendment to the Finance Bill which, crucially for the agency sector, now makes the public sector hirer liable for the consequent tax in various circumstances, we said at the time that the new legislation still created a number of problems.”

“The legislation takes an entirely new and worrying approach to contractor and payroll tax and creates a whole series of difficulties. We think it right and proper for these issues to be drawn to the attention of MPs who are now being asked to consider the Finance Bill.”

Marlowe explained further “The new rules go far beyond addressing tax avoidance and introduce a series of measures that not only break established principles of tax responsibility but also increase the values of tax and NICs, setting an unhealthy precedent for self-employed businesses and those that work with them.

“Apart from the lack of proper transitional provisions for existing contracts, the core underlying issue is the continued use of the old fashioned IR35 test as the starting point. Surely that baby is now too big for the pram? Its continued use leads to all the conflicts that arise, the need for the much criticised online tool, and the various damaging impacts that do not appear to have been properly thought through. We believe the new approach needs a thorough review so that it does not slip in under MPs’ radar.

“We also believe that this entire area needs a total overhaul not only for IR35 but for supplied agency workers generally. The government approach at the moment appears fragmented and based on tax avoidance as the driver whereas we believe that there should be a joined up approach that leads to better conditions for business in the UK, particularly important post Brexit. We advocated this last September in our Post Brexit Manifesto.

“It therefore would make sense to await the outcome of the Matthew Taylor and HOC Select Committee reports into employment status and corresponding taxation expected later this year” said Marlowe “before accepting a new business tax regime now that effectively jumps the gun. We hope that MPs will see the rationale and will bring about a delay in implementation”.

A full update of ARC’s public sector campaign, including a copy of letter to MPs can be found by visiting http://www.arc-org.net/ir35-campaign-update/