IR35 reforms: IT contractors express concerns over ‘inevitable’ private sector roll-out

IT contractors fear that a private sector roll-out of the IR35 tax avoidance reforms will be announced this year, according to research from tax advisers Qdos Contractor.

The organisation surveyed 1,500 contractors, 90% of whom work in IT, and 76% said they believe an announcement about the reforms being extended to the private sector will take place in 2018.

If that did happen, 61% fear that implementing the changes would be unmanageable, leading to a repeat of problems that dogged the public sector after the IR35 reforms came into force there in April 2017.

The changes saw public sector bodies take over responsibility for deciding whether contractors should be taxed the same as salaried employees (inside IR35) or off-payroll workers (outside IR35).

As reported by Computer Weekly at the time, this led to accusations about public sector organisations making “blanket” declarations about the tax status of the contractors they engaged with, resulting in numerous accounts of individuals quitting IT projects as a result.

“Understandably, IT contractors are worried about the potential roll-out of private sector IR35 reform,” said Seb Maley, CEO of Qdos Contractor. “The implementation of public sector reform last year – which resulted in a number of IT contractors being placed incorrectly inside IR35 – won’t have helped.”

The government confirmed in the 2017 Autumn Budget that a consultation about extending the changes to the private sector is being plotted, with the expectation that further details would be given in the chancellor’s Spring Statement on 13 March 2018.

But no further updates were offered on the topic, prompting speculation from lobbyists and stakeholders that the government might be reconsidering the move, as concerns continue about the accuracy of HM Revenue & Customs’ (HMRC) online IR35 status assessment tool.

“Predictably and rather unhelpfully, the government remains tight-lipped about its next moves with regard to IR35,” said Maley. “And unfortunately, the longer the silence continues, the more likely it seems that the private sector will face changes.

“Understandably, many contractors fear reform, and they don’t trust end engagers – or HMRC’s IR35 tool for, that matter – to make accurate IR35 decisions. The upheaval following last year’s public sector changes has not been forgotten.”

Maley added: “Should further reform arrive, it is vital that private sector companies are in a position to make well-informed IR35 decisions, particularly if they want to continue attracting the expert IT contractors they rely on.”