PCG and IR35 – dispelling the myths

13 Apr

PCG's Simon McVicker, Head of Public Affairs

In recent weeks, the contractor press and forum websites have been full of articles on IR35, the Office of Tax Simplification (OTS) and PCG’s role in it. Some of these reports have been misleading and inaccurate. As Head of Public Affairs I was intimately involved in PCG’s contribution to the OTS review on IR35 and I thought it might be helpful if I used this blog post to clarify our position and avoid further incorrect information around PCG coming to the fore.

PCG’s position was always, first and foremost, for the abolition of IR35. That was clearly understood by all members of the OTS, especially Michael Jack, the Chairman and John Whiting, the Director.

However the OTS Consultative Committee, which PCG was invited to join, was made up of leading intellectuals in the field of taxation, as well as accountants and legal experts. With such a diverse range of strong opinions across all industries, a solution on IR35 was never going to be black and white and the Consultative Committee was asked by the OTS to look at any alternatives to IR35 that could be a way forward.
In response to this, we developed the business tests as a second alternative we believe would have made IR35 obsolete for the vast majority of our members. The initiative also had support amongst other business groups.

At Roadshows organised by the OTS and at our own regional meetings (RLMs), PCG consulted with its membership and own Consultative Committee. There was general acceptance the business tests were a sensible way forward (alongside our primary goal of abolition).

Following our extended work on the OTS committee over a period of six months we were pleased that, of the three options on IR35 proposed by the OTS to the government in their interim report, two of our solutions were included – abolition and business tests. This is something I believe to be a sign of credibility for PCG. Many more ideas were rejected.

However following the reports publication, the Government decided that it could not abolish IR35 in the current climate. Privately, a Minister told us immediately after the budget that when Treasury officials looked in detail at the economic consequences of abolition, they concluded it was not a viable option. This came as a disappointment to me, as we had enjoyed positive conversations around this since the coalition came to power.

No political party in the UK is now committed to abolishing IR35 and last week I heard a senior Treasury official assuring a conference that they would have loved to ‘lance the boil’ of IR35 but it could not be done because the potential consequences would be unacceptable.

So we are where we are, not because of PCG, but because it was not acceptable to the Government to abolish IR35. Following their decision we have received some criticism from outside parties as you would expect, but these criticisms have not been supported by alternative solutions, either for us to take on board or to better represent freelancers at this time. Our responsibility now is to look forward and to do this we must recognise that the Government have openly admitted that IR35 must change along with HMRC’s conduct.

We fought extremely hard to get this admission and we will continue to fight very hard to defend our members and other contractors’ interests in our position on the new IR35 Forum set up by the Government. Going into the wilderness and walking away from this chance to improve the way freelancers are treated now, when we have finally convinced the Government that action is needed, is not an option to PCG. We know we can still get a better solution for our members.


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