HMRC has decided to release more information about the supposed working reform on agencies this past week. The research was supposed to explain the impact of the IR35 reform on the public sector in 2017.
This study, like many done by HMRC, was based on a tiny sample size of 34 recruitment agencies from 2020 to 2021. As with any survey of information taken during the pandemic, these numbers are bound to be suspect due to the large variety of external factors in play related to the lockdown.
The sloppy report state that agencies report a stable number of contract hires and that changes to these numbers were more about business developments than the pandemic or an indication of the effect of IR35 on contract hires.
They did admit that some agencies told them they hired fewer contractors due to IR35, but they were quick to state that this has more to do with other business needs than with IR35.
The report also tried to hide the fact that the CEST tool was widely criticised, even in this small sampling of recruitment agencies.
Research is Suspect
While it might be easy to applaud HMRC for conducting research into IR35, their sloppy and reductive manner of doing so deserves criticism. They also should be held to account for trying to hide all signs of IR35’s negative effect on the public sector while they are at it.
40% of the contractors working in the public sector said that hiring managers had lost skilled contractor access due to IR35 and many NHS workers said that skilled hires are much reduced at this time. 8 of 10 hiring managers in the public sector said that IR35 reduced hiring options and caused issues with labour supply.
Yet HMRC reports that things were looking great in the public sector to help justify the rollout to the private sector.
These changes are going to affect many contractors in the months to come, and umbrella companies are going to be asked to pick up the slack. There is nothing that will stop the coming negative changes, despite the efforts of many who desire to see contractors survive the pandemic and help the UK economy recover.
Contractors will need expert help and review for all of their contracts in the coming months, and they should view all missives from HMRC with extreme caution and suspicion.
