Despite the recent IR35 reform having such a negative impact on the public sector, it seems that the Treasury is now considering applying these changes to the private sector too.
It has been a long running rumour since the IR35 public sector reform, however, Mel Stride, Financial Secretary to the Treasury has now said in an FT interview that there is an “issue of fairness” in deciding whether to apply the same rules to the private sector.
He said: “The public sector has undergone a behavioural change which means we are seeing far fewer [workers] offer their services through service companies and yet the private sector is able to carry on with that behaviour unchecked.”
Responding to this news, Samantha Hurley, Director of Operations at APSCo, said, “We have long assumed that HMRC is continuing to consider an extension of the Off Payroll rules into the private sector. However, like our members, we believe that this will have an adverse impact on the strength of the UK’s labour market and wider economy.
“Mr Stride has said that efforts to improve compliance in the public sector appeared to have had a “significant impact”, highlighting how 90,000 additional public sector workers have been taxed as employees in the three months after the reforms were introduced in April. However, he has conveniently glossed over the fact that these individuals are likely to be charging higher rates for their services as the market adjusts by passing on additional tax and NI costs to the public sector client.