Qdos respond to private sector consultation

Qdos Contractor Submit Their Response to the 'Off-Payroll Working in the Private Sector' Consultation

The contracting industry has been up in arms debating the success (or failings) of the IR35 public sector reform, implemented April 2017, since HMRC’s release of the long-awaited consultation document for off-payroll working in the private sector in May this year.

The consultation on how to tackle non-compliance with the off-payroll working rules in the private sector concludes today, 10th August 2018.

Whilst Qdos Contractor is well known for providing contractor insurance policies, it all began for Qdos as a tax consultancy business, specialising in the IR35 legislation. Today we review over 700 contracts a month for IR35 compliance, provide over 8,000 contractors with IR35 insurance protection, issue a monthly IR35 advice newsletter for our interested customers, and provide countless hours of IR35 advice and consultancy each week.

Since the reform into the public sector, we have extended these services to the recruitment agencies and public sector businesses which have acquired the responsibilities previously held by the contractor, providing an independent service that equips every party in the supply chain with a fair and trusted approach to IR35 assessment.

As a defender against HMRC in over 1,500 cases, we have responded to the private sector consultation with a clear message; do not extend the off-payroll reform to the private sector.

Summary of Response

In our opinion, whilst the reform in the public sector may have correctly dealt with non-compliance in some areas, it has also had a significant, detrimental impact on thousands of workers who were genuinely operating outside IR35.

It is our view that the resultant treatment of workers goes directly against HMRC’s own Litigation and Settlement Strategy.

In the responses submitted to HMRC today, we detailed ways in which the public sector reform is flawed (particularly HMRC’s approach to the reform) including but not limited to:

• HMRC’s advocacy for role-based assessments which have no basis in the application of IR35,
• the disparity with employment rights leaving contractors burdened but without protection,
• the forced use of umbrella companies and the issues which come with this,
• and the no end of failings which accompany the Check Employment Status for Tax tool (CEST).

Furthermore, we suggested ways in which compliance could be improved, without the need for such large-scale, disruptive reform which goes against the basis of the IR35 legislation:

• We believe that HMRC should properly observe, at all times, their own Litigation and Settlement Strategy (LSS) and code of conduct during enquiries
• By defining a schedule as well as guidelines when opening an enquiry, all parties in the supply chain will be provided with clear expectations in order to both improve the efficiency of the process, and improve fairness in how an enquiry is administered
• We believe that HMRC have more than enough information to hand e.g. Connect, intermediaries quarterly reporting, tax returns etc, to enable them to identify those cases where they feel there is potential risk earlier
• Third party confidentiality should be removed where HMRC meet with the end client specifically to discuss the contractors’ tax affairs, thereby allowing both the taxpayer and their agent to be present at round table discussions. That way, the facts could be agreed upon at a much earlier point in the enquiry
• By conceding on cases with less than 50% chance of success, HMRC will waste less time, resource, and taxpayer money on lengthy cases
• It is vital that any increase in compliance activity is accompanied by better education and more resources – both for contractors themselves and others in the supply chain

We strongly believe that a case-by-case assessment of the full picture, is the only manner in which to apply IR35 in the true spirit of the legislation.

HMRC should improve their own efficiencies, make use of the powers already afforded to them, and follow their own code of conduct in protecting taxpayers rights, in order to achieve improved compliance - not apply a broad stroke and further complicate the tax system for genuine contractors and those who engage them, whilst still enabling end users to continue enjoying the flexibility that accompanies contract work with none of the responsibilities of an employer.

In addition to a critical assessment of public sector reform, we encouraged HMRC to at the very least, delay reform until such time as employment rights and tax are aligned, affording contractors the protection they should be entitled to.

We included 13 detailed written responses submitted to us by our contractor clients, as well as the responses of over 1,110 contractors surveyed. We would like to thank all of those who submitted a response to us and/or took the time to complete the survey.

We expect the results to the consultation this Autumn, and until then, encourage contractors to continue writing to their MPs objecting the reform, as well as maintaining a dialogue with clients and agencies.