Contractors should have a statutory right to be self-employed, peers are told in the latest evidence-gathering session of the House of Lords Select Committee on Personal Service Companies. In a busy session, industry experts were split over IR35’s abolition, although all agreed that they did not want to see any major changes to the legislation.
This evidence session was the turn of contracting, small business and recruitment industry experts to undergo two hours of questioning by the Lords’ committee. The witnesses and the highlights of their evidence were as follows:
- Samantha Hurley, head of external affairs at the Association of Professional Staffing Companies (APSCo) maintains that recruiters do not force contractors into using personal service companies, or any other service delivery model. She also noted that highly skilled contractors just don’t want the protections offered by legislation such as the Conduct Regulations and the Agency Workers Directive (AWR). In fact, 98.6% of the contractors hired by APSCo’s members opt out of the agency regulations, she explained.
- Martin Hesketh, managing director of Brookson representing the Freelancer and Contractor Services Association argued that IR35 should not be abolished. He said this was because the industry has already been through the learning curve to establish case law, and that it would cause irreparable damage to the UK’s flexible workforce and its economy if another 20 years were required to establish case law for an IR35 replacement. It is “quite a challenge to legislate for the entire flexible workforce”, he says, highlighting that measures intended to benefit vulnerable temporary workers have impacted negatively on contractors.
- David Ramsden, taxation and financial affairs chairman at the Federation of Small Businesses (FSB) called for a statutory right for contractors to be self-employed. He favours IR35’s abolition, believing the rules to be a “sledgehammer to crack a nut”. He was also highly critical of HMRC’s enforcement of IR35 and its claim that £475m in tax is raised due to the deterrent effect. In addition, he criticised the IR35 Forum as a “box-ticking exercise”.
- Chris Bryce, chief executive officer of PCG, highlighted that 80% of PCG’s membership incorporated for reasons other than tax, and noted that every contractor pays £843 per year to the service industry that has sprung up just to deal with IR35. He believes that the UK has an 18th century tax code that is not fit for the 21st century economy. Bryce warned that creating a definition of personal service companies would be like “painting a target on the back of these professional individuals”.
ContractorCalculator will be publishing further analysis of the latest evidence, which included some compelling arguments about the legitimacy of contractors using PSCs, in the coming days.