Proposals from Her Majesty’s Revenue and Customs (HMRC) to overhaul existing intermediaries legislation, commonly known as IR35, would be a disaster for the professional, flexible recruitment sector, according to Samantha Hurley, Head of External Relations and Compliance for The Association of Professional Staffing Companies (APSCo).

She commented: “The proposals include making administrative changes to the operation of IR35; improving HMRC’s compliance response and reforming the test for whether IR35 applies. However, the most worrying one is the fact that HMRC is considering asking engagers (i.e. end clients or recruitment firms) to take on more of a role in ensuring that the right amount of taxes are paid. More specifically that engagers take the responsibility for deciding whether or not the engagement is inside or outside IR35.”

“In reality this would mean that if the engager decides that the worker is outside IR35 but HMRC subsequently decides they are inside, the engager would be liable for any outstanding employment taxes or National Insurance contributions. This is obviously a big commercial risk and the result is likely to be everyone erring on the side of caution – a huge increase in false employment, an upward pressure on rates as contractors look to recoup lost income – and in the worst case, a loss of skills to other overseas locations.”

“While no-one would argue that there is a tax benefit to operating as a PSC (Personal Service Company), there is also a risk. Contractors operating through this model have no employment protection rights – and have no certainty of continuity of work.  If HMRC is, as it says, trying to create a level playing field, they will only ensure more of an inequality than exists currently.”

“I cannot emphasise strongly enough the devastating effect this would have on the UK professional flexible recruitment market – and the UK’s ability to compete in a global market and we will be responding in the strongest possible terms.  We are already working on a contact list of parliamentarians and end client stakeholders and are also organising collaboration with other recruitment, accounting, contractor and end client stakeholders to work on joint activity with meetings due to be held before the end of August,” she concluded.

To access the discussion document, click here.