'Tech will be hit hardest' - Gov slammed for refusing to delay IR35

Launch of review into controversial tax reforms will not affect its 6 April start date, drawing criticism from many sectors

The tech industry will be the hardest hit by the government's refusal to delay the April start date of the controversial IR35 tax reforms, according to one industry figure.

Simon Winfield, UK and Ireland MD at global recruitment firm Hays, stated that the delay will affect investment in the tech sector.

"If they are undertaking additional consultation now until mid-Feb and the reforms are coming into effect from April, there simply isn't enough time to give this the attention it so desperately needs," he said.

"The IR35 reforms will hit technology harder than any other market and introducing them will counter any investment in this area.

"A number of industries are suffering from niche skills shortages and these reforms could worsen these gaps, just at a time when we have a real opportunity to make the UK a more attractive place to work and do business.

"Further disruption and distractions aren't what anyone needs now we've finally got some of the uncertainty behind us."

Currently the rules - also known as IR35 - allow contractors to determine their employment status when hired by a private organisation. Under the proposed reforms, the determination of tax status will shift to the hiring company.

This means that self-employed individuals who are contracted by a company and operate similarly to an employee of that company will have to pay the same income tax and national insurance contributions as a permanent employee, without the benefits of pension, holidays, and so on.

These reforms apply only to medium-sized to large businesses and could result in the employer paying more for the contractor's services. IR35 reforms came into effect in the public sector in 2017, which subsequently saw an exodus of IT contractors to the private sector.

HM Treasury will conduct the review with Rt Hon Jesse Norman MP and intends it to address the "concerns" from businesses and affected individuals about how they will be implemented.

The review will include a series of roundtables with representatives of those parties affected, including contractors and medium-sized and large businesses to understand how the government can ensure a "smooth implementation" of the changes.

However, the decision not to delay the April deadline in light of the review has been met with heavy criticism and Winfield is not alone in calling for a postponement of the implementation date.

Andy Chamberlain, deputy director of policy at the Association of Independent Professionals and the Self-Employed (IPSE) said that the decision is "hasty and inadequate".

"Not only has the government not said it will pause the changes, it has also allocated far too little time for a full review and said nothing about selecting an independent chair," he said.

""Major businesses, including most of the large banks, have already announced they will no longer engage contractors out of fear they will fall foul of the notoriously complex legislation.

"Even before the new rules take effect, they are precipitating a crisis among the self-employed.

"The government must urgently reconsider. It must give more time for a full review that includes an impact assessment of the changes in the public sector and the likely effects on the private sector."

Jon Stride, co-chair of the Association of Taxation Technicians (ATT) Technical Steering Group, called on the government to postpone the reforms until 2021, calling the Treasury's February deadline "overly optimistic", leaving just two months for its findings to be put into effect.

"Many important practical issues, such as when liability can be transferred within an engagement supply chain and exactly what information will need to be shared by clients, are not addressed in the draft legislation for the off-payroll rules at all," he said.

"We may also see risk-averse positions being taken by businesses; for example, a blanket decision to put all workers onto the payroll regardless of the nature of the arrangements, to the detriment of workers.

"The government has previously stated that it was committed to learning from the rushed introduction of these rules to the public sector in 2017. We believe that introducing the off-payroll rules to the private sector in April 2020, when final legislation and detailed guidance are not yet available, risks repeating the errors made in the public sector, rather than learning from them."