IR35 Consultation: Overcomplicated Legislation and Little Ti
The consultation shines a spotlight on the additional complexities of rolling the IR35 changes to the private sector. It's always been the intention to exclude small businesses in the rules, but there's still no watertight definition of what's going to constitute a small business. In the public sector, in which the rules already apply, the size of the organisation does not matter as the rules apply to all. However, within the private sector the size of the company is a crucial factor.
A legal no-man's land beckons for small private companies, will they have to implement IR35 rules or otherwise? The present consultation suggests using the definition of small company in the Companies Act 2006, but this only applies to limited companies. If you're a small unincorporated business, for example a sole-trader or a partnership, you probably have to tread cautiously and take appropriate advice before concluding you're safe from IR35.
The consultation proposes defining whether an unincorporated business is small through the number of its employees. This is a questionable approach given a company might become qualified as small only when it defines people in its workforce as off-payroll, the whole crux of the issue IR35 is attempting to address.
The consultation also raises a substantial question over timing. It's pledged the legislation to introduce IR35 changes come in a draft Summer Finance Bill, however the consultation runs to 28 May 2021. This leaves a really short window for it to be incorporated into any draft Summer Finance Bill, which may need to be published soon after the deadline to permit time to pass through parliament.
Introducing the relevant IR35 legislation following the Autumn Budget may be past too far to satisfy the prospective implementation date of April 2021. In attempting to introduce complicated legal alterations in a relatively short period of time the federal government is likely to run up against its very own self-imposed deadline, along with a potential repeat of the items happened when IR35 has been around since the Public Sector, with only a matter of weeks of notice.
