Latest IR35 announcement: Corecom’s view

HM Revenue & Customs (HMRC) last week announced a consultation on a new offset mechanism that will be introduced into Off-Payroll legislation to prevent double taxation. While it’s a step in the right direction, further reform is still required.

Rick Hughes, Director at Corecom Consulting says;

“Currently, tax already collected from a contractor is not offset against any tax bill handed to a business. This means HMRC is effectively collecting the tax twice, which is clearly morally wrong. It also means businesses have been put off hiring perfectly legitimate self-employed contractors for fear of this unfair taxation. This consequently has a needlessly negative impact on the labour market in a time of crippling skills shortages for many businesses.”

The Association for Professional Staffing Companies explains further in its statement;   

“APSCo believes that there needs to be clarity, written into law, around the definitions of employment and accommodations that are required to support the highly skilled flexible labour market in a fair manner. As it is currently defined, Off Payroll legislation is unsatisfactory, particularly around highly-skilled self-employment. This has led to recruitment firms being the deemed employer, while not being responsible for the employment status decision. APSCo believes that Off Payroll needs reform, something that it hopes will be factored in as a follow-up to the offset mechanism.”

In our view, it’s also counter-intuitive to announce a policy that actively discourages highly skilled over 50s from going to work. The labour shortage currently facing the UK is a nuisance for employers and businesses and its effect is felt cross-sector; particularly in the UK Tech sector where we see talent shortages across the board. There are many answers to this, including some of our own, but freezing out skilled, experienced experts who could work as contractors well into their 60s is not helping. It is well documented the talent shortages are partly driven by the exodus of over 50s from the workplace post-Covid. The opportunity to earn additional income pre-retirement could be a tempting offer that provides a win-win for employers and contractors alike.

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