Will the private sector be the next casualty in the war over tax avoidance?
In April 2017 the government made a slight change to existing legislation. Although small in detail this change has had massive consequences with up to 76% of public sector departments reporting a loss in skilled workers.
Let’s go back to the beginning, in 1999 Gordon Brown announced the government would be taking steps to reduce tax avoidance by “disguised employees”. The Intermediaries legislation (AKA IR35) came into force in April 2000 with the aim of discouraging real employees being paid through a limited company to increase their take home pay. If the government investigated a limited company and found them to be in fact an employee the director would face liability.
In April 2017 the government moved the liability from the individual to the body paying the limited company. There was very limited guidance before the changes took effect which frustrated all within the public sector and led to blanket bans from the NHS and TFL. These bans have since been rescinded but the public sector has been hit hard by this change in the legislation. Many workers are finding that they are no longer able to work via their own limited company within the public sector so are making the move across to the private sector leading to a shortage of skilled workers.
Since April the private sector has been unsettled over the possibility of the same change taking effect. However, the Taylor review carried out in July 2017 made it clear that the UK employment market has to remain agile and that there are a group of highly skilled people that should not be removed from the work force.
It has been confirmed that some change with IR35 will be taking place in the private sector, but the government are seeking consultation to ensure the effect is not as detrimental as seen within the public sector.
We are expecting to hear more with the Spring review and are hopeful that the government will listen to the advice given during the consultation period.