Treasury rules out an IR35 review as public bodies are told enforcement stays a priority

Any hope that the change of Chancellor would reopen the off-payroll rules has been closed. The Freelancer and Contractor Services Association said on Tuesday that the Treasury wrote to accounting officers across the public sector on 19 June to restate that enforcement of the off-payroll working rules remains a compliance priority, and that Treasury minister Dan Tomlinson ruled out a review of the legislation in a statement on 30 June. Proposals for a single worker status, floated as part of the wider employment rights agenda, have been set aside.

The letter and the statement both pre-date John Healey's appointment on 20 July, but the FCSA's reading is that nothing about the new administration alters them. Its advice to engagers is blunt: the rules are settled for the foreseeable future, and the question for a business is not whether they will change but whether its evidence of reasonable care would survive an enquiry.

What the Treasury is saying

The letter to accounting officers follows a pattern established in 2012, when the Treasury first required departments to account for off-payroll engagements, and it makes the same point. Public bodies are expected to make status determinations, to record the reasoning, to operate a dispute process that works, and to be able to show that contract terms match working practices. The FCSA's own guidance, published last month, sets out the same five requirements and adds one: the evidence must be stored in a form that survives reorganisation, because the enquiry may arrive years after the engagement ends.

The department has also modelled the effect of this April's change to the small company thresholds, which moved the turnover and balance sheet tests to £15 million and £7.5 million and returned responsibility for status to contractors engaged by an estimated 14,000 newly small businesses. HMRC's estimate of the annual tax loss from that change is around £20 million, which is small beside the £1.2 billion it once forecast for private sector non-compliance, and small enough to suggest that the department does not regard the reclassified companies as a compliance risk worth chasing.

The market this month

The demand picture, at least, has improved. The KPMG and REC Report on Jobs published on 10 August, covering July, recorded the end of a 45-month decline in permanent placements and a fourth consecutive monthly rise in temporary billings, with growth among the strongest of the past three years. Temporary vacancies rose for the first time in two years. Temporary pay rates rose at their fastest for 26 months. Maxine Bligh of the REC described rays of light breaking through as employers revived hiring plans.

For contractors the composition matters more than the headline. Engineering and blue-collar roles led the increase in temporary demand; IT and computing was not among the sectors singled out. London and the North of England saw the steepest rises in temporary billings, and the Midlands recorded slight falls. Candidate availability continued to grow, which the report attributes to redundancies and limited opportunities, so the improvement in demand has not yet translated into scarcity or rates.

Joint and several liability

The umbrella market, meanwhile, is four months into the joint and several liability regime that took effect on 6 April, under which an agency and ultimately an end client can be pursued for PAYE that an umbrella fails to pay. The predicted effects, forced moves between umbrellas, closed preferred supplier lists and disputes over accrued holiday pay, are being reported. Whether the regime reduces non-compliance or simply concentrates the market in the largest providers is a question for the first full year's figures.

The Autumn Budget is set for 28 October. The industry's bodies are preparing their submissions. On the evidence of June's letter, the off-payroll rules will not be in them.