Commenting on the government announcement that it will review implementation of the proposed new IR35 rules set to apply in April 2020, Adrian Marlowe, chairman of the Association of Recruitment Consultancies (ARC) said “no one should be surprised at the decision. The government has long committed to extending this reform and the arguments for and against have been rehearsed at great length. The measures have been criticised by us and others, and alternatives proposed, but all have been substantially rejected. Along with others in the industry we would like to see a wider review, but we do not expect any material change to the rules following this review.

The issue that should be recognised is that the perception of contractor tax avoidance will not go away so long as the decision as to application of the rules is left with contractors and their advisers. Hence the new requirement for hirers to make the decision and the fee payer and hirers to be responsible for the tax. This forces compliance by raising the risk of investigation and claim by HMRC to a high level, and indeed some hirers are making decisions in line with this view.

However recruitment businesses should not lose sight of the fact that employers will always want to hire workers temporarily, and this tax measure does not stop that. This does not mean we are in favour of it, as a better balance could be achieved if the government were to start afresh. However, hirers should also note that agencies can continue to supply workers and contractors without the risk of direct employment just as before. The decision by those businesses to refuse to hire contractors does not mean the end of worker hire, it simply means that those businesses will not work with company contractors because of the tax risk.

IR35 only affects tax and, as with all other measures that have applied to the sector over the years, businesses will adapt. Alternatives are available, although care should always be taken to avoid replacing one risk with another. Always get advice from a trusted independent source.

In summary, the key is to avoid viewing the tax as the most important issue; it is not. Skilled temporary workers will always be needed, and the market will always determine rates.”

Important update  – ARC’s legal partners Lawspeed will be be hosting a half day IR35 seminar on the afternoon of Wednesday 26th February. For full details and to book click here.