IR35 causing "blockage in the market"

The IR35 reforms enacted by HMRC have disrupted the market due to the April deadline imposed on businesses, leaving them with limited time to adapt according to the software company’s CEO James Poyser.

“As a board of directors, IR35 is something we’ve prepared for a long time and modelled it. We have a strategy in place to work with the off-payroll charges,” says Poyser. “Yet, the challenge we have is that the behaviours we are seeing were not predicted by HMRC or the Treasury, and it’s causing a real blockage in the market.

“Large organisations have realised that IR35 regulations are far more complicated than they first envisaged – and they are not going to be able to deliver fair IR35 assessments in time for April the 6th. A lot of them are just pulling down the shutters on contracts and the consultants they’re using in their companies, which is why we’re lobbying mostly in the Treasury. The business community isn’t ready for this yet,” he says.

Appeal

In late January, Poyser sent a letter to chancellor Sajid Javid urging a suspension of the IR35 reform.

“As was predicted in the 2019 consultation, companies are simply side-stepping the right to a fair determination with corporate policies that ban engaging the self-employed, and only allow employment via PAYE,” read the letter

“It is folly to think that HMRC are going to be able to educate 60,000 businesses, 20,000 agents and support them to assess 400,000 self-employed workers by April. Let’s take some time to do this properly.”

Earlier this month, inniAccounts disclosed the UK was facing a £2.2bn productivity gap in the first half of 2020 due to IR35 reforms as three quarters of contractors left UK PLCs.

“HMRC estimates that IR35 reform will generate an income of £1.2bn for 2020/21. But it’s clear from the scale of departures that the cost of blanket bans and unfair assessments far outweighs the business case HMRC argues.

“The OBR flagged off-payroll tax uplift uncertainty as “very high” and we believe the macro-economic impact of the behaviour we are witnessing has not been accounted for. The legislation is fundamentally flawed and rolling it out will have grave implications for UK PLC and the lives of hard-working skilled people,” Poyser explained in a press release.

Poyser took part in the IR35 protest outside Parliament buildings last week, which urged the former chancellor to suspend off-payroll charges.

Digital gap

Despite an increasing competition in the accountancy sector, the CEO of inniAccounts also claims that a scope remains for firms to exploit benefits of technology.

“I believe the accountancy profession has got a lot to learn from other professions when it comes to the application of technology. So yes, there are pockets where it is competitive and people are starting to apply technology, but I still think there’s a huge amount of scope for innovation and differentiation within the profession,” says Poyser.

Using technology as an asset, the accounting firm intends to utilise mobile devices – an approach designed to meet clients’ future requirements.

“We have sophisticated goals. We are a technology-based firm, so we have had a lot of issues about trying to exploit the benefits of technology, and in the next five years we aim to become a mobile first practice. We will be exploiting artificial intelligence and automation further, to drive value back to our clients and freeing our team up to help them with more tricky advisory questions,” adds Poyser.

inniAccounts was rewarded “Independent Firm of the Year – Wales and the Midlands at the British Accountancy Awards last September.

The BAAs award marked the “explosive growth” of the firm, in which the prize encouraged its success. Poyser says the nomination “for such a prestigious award was huge itself – but to win it was brilliant,” and a “big motivation.”

Photo credit: Samantha Crowe