Resource Solutions Group Plc Solicit Contractor Feedback over Controversial IR35
During December 2010 and January of this year, Resource Solutions Group Plc (RSG) approached its contractor base to gain feedback on the Small Business Tax Simplification Review, including the controversial IR35 legislation.
Common concerns brought to light by contractors included the uncertainty around the application of IR35 and the potential financial impact to small businesses if a decision made by HM Revenue & Customs went against them despite their best efforts to engage on a self-employed basis. Many contractors felt that the disproportionate amount of time and money required to get contracts reviewed could be better spent on business development opportunities. Many also felt discouraged from entering the arena, reducing the amount of flexible contracting workers available to the hirer as a consequence.
Karen Ainsworth, in the legal services team at RSG said: “Small businesses inevitably face many problems in a competitive marketplace. Many have to compete against consultancies which employ hundreds of contractors and who can readily deploy staff at short notice. Without having to be concerned about bureaucracy and red tape with regard to assignment specifics, these larger companies have a significant commercial advantage over the small business.”
“As an independent operator, the small business has to have an understanding of contract law, employment law and tax law in order to be able to judge whether he/she is ‘operating in business on his/her own account’ and this decision has to be taken prior to a contract being accepted. Often the parties concerned are not entirely sure about contract specifics, save that the hirer has a requirement for specialist skills that are not available within their organisation, and recognise the need to go to market to seek such skills elsewhere.”
Many contractors also reported their concern about pre-engagement vetting.
Karen said: “Some hirers, specifically those in the financial sector, require contractors to have the same on-boarding process, and sign the same policies that are a prerequisite for employees. One contractor was recently so concerned about the similarity between the vetting process for employees and contractors that he actually declined a placement. He was worried about how HM Revenue & Customs would perceive his self-employed status with regard to ‘IR35’ if he had to go through the same vetting as an employee, and sign similar policies such as client security and confidentiality.”
It is feared that the Agency Workers Regulations (“AWR”) due to start on 01 October 2011 may create more uncertainty, as an agency worker will have to be genuinely self-employed, working through their own limited liability company in order to be classed ‘outside’ the scope of the AWR.
Karen said: “Ultimately, having a clear and watertight definition of what ‘genuinely self-employed’ means is fundamental to creating a workable system for ‘IR35’ to move forwards and a framework for other legislation such as the AWR.
“RSG are working alongside employment lawyers and industry bodies to lobby the Office of Tax Simplification to look into the legislation and provide clear and simple guidance for contractors. We recommend addressing the principles of contract law, and the differences between ‘employed’ and ‘self-employed’ as a first priority.”
