IR35 reforms are 'demonising' contractors and locking them out of work, chancellor warned

Self-employed workers across the UK are being locked out of work by enterprises that are enforcing blanket bans on the use of contractors to side-step the IR35 reforms, chancellor Sajid Javid has been warned.

In a letter to the chancellor, James Poyser, CEO of online accountancy consultancy InniAccounts, said the self-employed are becoming “demonised” by private sector organisations that have “pulled down the shutters” on using contractors in anticipation of the IR35 reforms coming into force on 6 April 2020.

From this date, medium to larger-sized private sector organisations will assume responsibility for determining how the contractors they engage with should be taxed, based on the work they do and how it is completed.

Organisations are expected to individually assess every contractor they use on this basis, before deciding if they should be taxed in the same way as a permanent, salaried employee (inside IR35) or as a freelance, off-payroll worker (outside IR35).

However, in the run up to this change in responsibility occurring, a number of organisations have sought to side-step this requirement by opting to phase out the use of contractors from their workforce, which – as Poyser wrote – is affecting their ability to find work.

“This is gravely concerning for both the individuals and their families, and our economy,” he wrote. “The self-employed who are complying with the existing rules have been locked out of large businesses.”

To back this point, he shares data accrued by InniAccounts’ recently launched online directory at www.OffPayroll.org.uk, which details how various private sector companies are approaching the reforms, based on anonymised feedback from the contractor community.

“This month alone we have feedback from over 900 self-employed individuals who are providing services to over 350 organisations, and 69% have been told their client is no longer willing to engage the self-employed, and no status determination will take place,” he wrote.

As previously reported by Computer Weekly, this is true of a number of high-profile private sector companies, including Lloyds Bank, Barclays, GlaxoSmithKline, IBM and the Bank of America, but the effects are being keenly felt elsewhere too, Poyser added.

“It gets worse. HSBC, RBS, Santander, Sainsbury’s, LME and more have banned the self-employed from their entire supply chains. This ripple is affecting our flourishing scale-up boutique consultancy firms – particularly in fintech – which are delivering innovation that our nation needs now more than ever.”

For this reason, Poyser said the government needs to press pause on the roll-out of the reforms, but must also pass legislation that will ensure all contractors receive a fair assessment of their IR35 status.

“I’m urging you, chancellor, to halt this reform and legislate to ensure that the self-employed, and the services they provide, are not locked out of our economy,” he added.

“Please legislate to prevent companies from side-stepping the right to a fair IR35 status determination. Give the genuine self-employed the opportunity to continue to contribute to our economy.”

In an interview with Computer Weekly earlier in January, Poyser talked about the destabilising impact blanket bans are likely to have on the digital ambitions of private sector enterprises which typically rely on contractors to deliver change and provide their organisations with specialist skills.

At the same time, these firms are also risking reputational damage by not taking the time to carry out fair and accurate assessments of the tax status of every contractor they engage, he said.

This is not the case across the board in the private sector, he continued, as feedback shared on www.OffPayroll.org.uk shows there are a sizeable number of firms that are putting the time and effort in to ensuring they are meeting their new-found obligations.

For this reason, he said at the time he would be in favour of the government delaying the onset of  the reforms by six-months so the private sector at-large can get its house in order, which is a plea he repeats during the conclusion of his letter to the chancellor.

“It’s time to halt the reform. It’s clear that businesses are not prepared for this change. Recruitment agencies are not prepared. It is folly to think that HMRC are going to be able to educate 60,000 businesses and 20,000 agents and support them to assess 400,000 self-employed workers by April. Let’s take some time to do this properly,” the letter concluded.