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FCSA CEO Phil Pluck comments on the Government’s response to the Economic Affairs Finance Sub-Committee inquiry on off-payroll reforms

On 27th April 2020, the House of Lords published their report and recommendations on off-payroll reforms in the private sector following extensive consultation with experts from community, trade and professional bodies, and trade unions. The Lords recommendations were, on the whole, sound, pragmatic and considered the need to ensure a compliant and fair playing field for the implementation of the reforms to the off-payroll regulations.

They also recognised the work set out in the Taylor Report and the need to implement fair employment conditions and rights whilst applying new taxation measures to the private sector.

Since the publication of the Lords recommendations, we have of course witnessed the widespread and devastating impact of the coronavirus pandemic on the UK economy. The Government has acted with speed to provide short-term financial support to UK businesses and employees, however, there are now some serious cracks emerging in economy that will bring added pressure. The imminent enforcement of the off-payroll reforms will not help the government’s response to the economic challenges that are before us.

The primary plea from the House of Lords was to suggest a further delay beyond the April 2021. The Government’s response was a lengthy but firm “no”, stating that the delay to the original 2020 schedule was only granted because of the emergence of the coronavirus pandemic.

Their response, however, fails to recognise that the pandemic and its knock-on effects will continue way beyond the initial lockdown period.  The true economic impact, and that of employment, are only just beginning to emerge and are expected be at their most disruptive later this year and early next year; exactly at the point at which off-payroll reforms will come into effect, causing further and unnecessary disruption to the contractor workforce and the businesses that they rely for payroll.

The Government has also chosen to ignore the Taylor and Lords recommendations that employment law changes be aligned with these reforms in order to protect freelancers. The recession that we are now entering at speed will see conventional models of employment once again go through turmoil. Contractor numbers, whilst initially declining, may start to dramatically increase at a later stage. In the same way that the UK has emerged from previous recessions, the temporary workforce has played a significant part in growing the UK’s economy.

The Government has responded in a way that says COVID-19 is over, or will soon be, and therefore all legislative implementation can go back to normal. April 2021 will not be normal and to ignore the Lords key recommendations is just wrong. The I’s and T’s have not been covered on off-payroll and as a result non-compliant companies in the contractor supply chain will emerge in greater numbers. Consequentially, more contractors will emerge, taxed as employees but without employment rights.

FCSA member companies are already fully compliant, behave in an ethical fashion, and support good practice within the supply chain but from that position we are saying we want to work with Government to create regulation within the umbrella sector, understand what employment law needs to support ethical companies and their employees, look pragmatically (see the House of Lords recommendations) at IR35 reform, and delay until we have this in place to ensure fairness to all of the parties who will be working within the freelance supply chain.

The response contains estimates without explanation of increased tax revenue from the changes. I conclude that this highly challengeable increased income is the only factor at play here and this is disappointing to those of us in the industry that want transparency and fairness throughout.