Off-payroll consultation closes with the industry united against extension and the loan charge eight months away

The consultation on extending the off-payroll rules to the private sector closed on Friday, and the responses that have been made public share one conclusion: the public sector reform of April 2017 should not be copied, and if the government insists on copying it, it should not be copied in April 2019.

The document published in May proposed applying the public sector model to every business that engages contractors, making the engager responsible for deciding IR35 status and the fee payer responsible for operating PAYE where the engagement is inside. The Treasury's case rested on its claim that the public sector reform had raised an additional £410 million in its first year without significant disruption, and on independent research that found most public bodies coped.

The responses

IPSE's submission says the research measured the wrong period, that its own surveys show large numbers of contractors leaving public sector work, and that blanket inside determinations by risk-averse bodies have become the norm. The FCSA argues that the reform has driven contractors into non-compliant umbrella schemes, which it says the government should have foreseen and has not addressed. The Recruitment and Employment Confederation warns of the burden on agencies, which as fee payers carry the payroll obligation and the liability if the engager's determination is wrong. The Chartered Institute of Taxation, the ICAEW and the Law Society all argue that the status tests are too uncertain to be applied at scale by businesses without HMRC's resources, and that HMRC's own tool does not resolve the uncertainty.

The broader business organisations are less absolute. They accept that non-compliance exists and ask for a delay, a smaller-business exemption, and a status test that gives a reliable answer. That is the ground on which the argument will now be fought. The Treasury has not committed to a date, and the Budget in the autumn is the earliest point at which one can be announced.

The other deadline

While the consultation was running, the second deadline that matters to a large part of the contracting population has moved closer. The loan charge takes effect on 5 April 2019. From that date, any loan made through a disguised remuneration scheme since 1999 that remains outstanding is treated as income in the 2018-19 tax year and taxed accordingly. For a contractor who used an employee benefit trust or a contractor loan scheme for several years in the 2000s, that means the whole of the accumulated balance taxed at once at the rates that apply to a single year's income.

HMRC's settlement opportunity, which allows scheme users to agree the tax on the loans on more favourable terms than the charge, required them to register interest by the end of May and to supply the information HMRC needs by 30 September. The department says that thousands have registered. Advisers say that thousands more, many of whom were told by the schemes' promoters that the arrangements were lawful and have received no communication from anyone since, do not know that the deadline exists.

The two issues are connected. The government's answer to the criticism that the loan charge is retrospective is that the tax was always due. Its answer to the criticism that the off-payroll rules push contractors into schemes is that the schemes have always been unlawful. In both cases the individual who did what a provider told them is the one who pays. A campaign group of loan charge victims has formed and is lobbying MPs. The consultation responses on off-payroll working, read alongside it, describe a supply chain in which the person at the bottom carries every risk.