ARC statement: Budget announcement 22 November 2017

The Association of Recruitment Consultancies (ARC) welcomes the cautious approach adopted by the Chancellor in his budget today in relation to imposition of the public sector tax rules (commonly known as IR35) on the private sector and in further considering employment practices following Matthew Taylor’s report earlier this year.

There is no doubt that the extension of the public sector rules to the private sector would be highly testing. There is significant evidence that the public sector rules and the means of deploying them by way of an online tool (CEST) are unsatisfactory. ARC had challenged various aspects earlier this year, and there is an argument for saying that both the rules and the means of deployment are incompatible with historical business tax law.

ARC believes that the consultation should consider the broader aspect of the application of the availability of tax reliefs to businesses in order to take a rounder approach more suitable to the future needs of our economy. This will require a wholesale review with joined up thinking on the principles rather than one simply driven by the Treasury under the heading of addressing tax avoidance. The starting point is that businesses per se are entitled to tax reliefs, so in what circumstances should they be disentitled. The practical effect of the IR35 public sector rules is to disentitle business from reliefs.

As regards the review of employment in the context of modern working practices, again ARC welcomes this and notes that this announcement very closely follows a report from two Commons Select Committees on this area published on 20 November. That report suggests amongst other things that an individual in business on his or her own account is one who is neither an employee nor a worker. ARC believes this is the wrong test and will be promoting the proposition that a business should be determined on proper business tests, not on an alleged employment status.

Adrian Marlowe, Chairman of ARC said, “These two areas are linked and are critical for the success of the recruitment supply industry which plays a key role in supporting businesses and facilitating flexibility in the UK, itself a key factor in the success of our economy. Despite the clear linkage, neither is being considered in connection with the other, and both propositions should be expanded to consider the role and nature of businesses. ARC invites all who agree that there should be a wider, joined up review into these areas to work with it in campaigning for a full and proper debate. The outcome has the potential to affect productivity and shape the UK’s ability to compete in the context of a highly competitive global environment.