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Off-payroll rules in 2019: A year to prepare for the inevitable

15th Jan 2019
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Dave Chaplin dissects the government’s current plans to roll its off-payroll rules to the private sector and outlines what contractors and those hiring them can do to prepare.

When Benjamin Franklin, paraphrasing Daniel Defoe, wrote “In this world nothing can be said to be certain, except death and taxes," he had no idea of the inevitable repercussions that will be felt when the government extends its off-payroll rules into the private sector.

As the government plans to drag the whole contracting sector into the sorry saga of IR35 by 6 April 2020, this year will be crucial for the industry. The forecast is bleak. The threat of extensive damage can be predicted reliably, based on the results that have already been observed in the public sector. However, there is time to mitigate the effects by assessing the risks and taking appropriate preventive measures.

Storm clouds gathering

The risk for both contractors and firms is large and the knock-on effects will be felt widely. Firms still seem to be blissfully unaware that they are going to be saddled with an additional 12% cost in extra taxation for hiring contingent workers. This is probably because HMRC and the Treasury have refused to shine a light on this damaging fact, instead choosing to scapegoat contractors as being tax avoiders. The reality is, of the extra tax due, circa 84% of it is payable by the firm hiring the contractor.

From an analysis of the public sector experience, it is likely that those responsible for hiring contractors will over-react, try to force contractors to work within IR35 rules, treat them as full-time employers for tax purposes, try to pass their new tax bills onto them, and not provide all the rights and benefits that go along with full-employment status.

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