Source · Select Committees · Public Accounts Committee
Recommendation 3
3
HMRC is not doing enough to understand the impact of the reforms on workers and...
Conclusion
HMRC is not doing enough to understand the impact of the reforms on workers and labour markets. The complexity of the rules, and the perceived risk to hiring organisations of failing to comply with them, may lead to changes in behaviour by both workers and hirers. In some cases, contractors have reported that their last clients had stopped all use of PSCs, while some contractors have increased their rates or avoided work if it is within scope of the IR35 rules. Such behavioural impacts 6 Lessons from implementing IR35 reforms could have knock-on consequences for workers and labour markets, such as loss of work or ability to work flexibly. HMRC has not carried out research into these types of wider impacts, and it is not convinced by evidence provided by others even where this indicates there may be significant issues. HMRC is also too dismissive where a significant minority of people and businesses report being adversely affected. Recommendation: HMRC should conduct and publish specific research into the impacts of the IR35 reforms on contractors and labour markets, to check it is being applied as intended and not adversely affecting employment opportunities.
Government Response
Not Addressed
HM Government
Not Addressed
3.1 The government agrees with the Committee’s recommendation. Target implementation date: December 2023 3.2 Although the government agrees with the Committee’s recommendation, it disagrees with the Committee’s conclusion. 3.3 The government has already published research on the short and long-term impacts of the public sector reform and is committed to publishing research on the impacts of the reform in the private and voluntary sectors later this year. 3.4 A central part of the government’s research into the impacts of the off-payroll reforms is with client organisations, as they have the best understanding of the overall picture of how they are engaging off-payroll workers. This research gathers data on changes to the way off- payroll workers are engaged, and changes to their rates of pay and to the ease of recruitment. 3.5 The government is also already supplementing this with research with other parts of the supply chain: research with agencies was published in March 2021, and research with off- payroll workers will be published once complete. The research with off-payroll workers will primarily focus on tax information and advice but also gathers insight into the impacts of the off-payroll reforms. 3.6 In addition to research, HMRC is conducting internal analysis to identify off-payroll workers who may have been affected by the reforms, and what changes may have occurred in the labour market following the reforms. This will be published once complete.