The Association of Professional Staffing Companies (APSCo) has reiterated its calls for changes to Off Payroll rules, including the need to introduce an offset mechanism to ensure double taxation is not unfairly impacting staffing firms.

Tania Bowers, Global Public Policy Director at APSCo, said, “APSCo has long been vocal over the reforms that are needed to ensure Off Payroll legislation doesn’t unfairly penalise both recruitment firms and highly skilled contractors. We continue to work closely with HMRC on changes to the rules including potential solutions to the double taxation that is inherent in the current rules. In its current form, Off Payroll legislates that HMRC can collect tax from the worker via corporation and personal taxes, and then recover full PAYE and NICs from the fee payer in the event of a reclassification. This is leading to recruiters and clients being unfairly taxed.”

Bowers added that APSCO stands by its view that Off Payroll is having a detrimental impact on the UK’s flexible labour market. According to Bowers, Off Payroll has exacerbated the shortage of skilled professionals, as many left the market during or following the roll out of the rules, not wanting to change the way they work.

“This has consequently decreased the flexibility and agility of the labour supply chain at a time when skills are in increasingly short supply,” Bowers said. “We believe wider reforms are needed and will continue to work closely with HMRC to guide any future developments on behalf of the staffing sector.”

HMRC's justification for IR35 is that it helps to ensure fairness and consistency in the tax system by preventing individuals from avoiding taxes by working through a Personal Service Company when they should be considered an employee for tax purposes. By requiring employers to treat these individuals as employees for tax purposes, HMRC argues that it ensures that they pay the appropriate taxes and receive the same benefits and protections as other employees.