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Worth a read: Inquiry on ‘How Contracting Should Work’ by The Loan Charge APPG

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Worth a read: Inquiry on ‘How Contracting Should Work’ by The Loan Charge APPG

A new report has been released by the Loan Charge All-Party Parliamentary Group (APPG). The report entitled ‘Inquiry on How Contracting Should Work’, investigations how contractors and freelancers should operate and how they should be taxed. It also makes suggestions to the government and includes exclusive quotes from well-known experts and stakeholders within the temporary labour sector. We’ve summarised the report in this article and have included some useful links. Keep reading to find out more. 

What is the Loan Charge APPG?

The Loan Charge APPG (All-Party Parliamentary Group) group consists of parliamentarians from all parties within Parliament. Every member has joined because they have genuine worries about legislation that the government rolled out in April 2019 called the Loan Charge (2019). The Loan Charge APPG believe the legislation is unfair, and HMRC should not be enforcing it because temporary workers are treated unfairly. To summarise the legislation – HMRC is retrospectively claiming underpaid tax by users of tax avoidance schemes – even if they engaged with them by accident, and many years ago.

What did the Loan Charge APPG’s inquiry set out to achieve?

The inquiry examines how contracting and freelancing is undertaken in the UK and examines how these workers should be fairly taxed. Emphasis is also placed on both tax avoidance schemes and disguised remunerations schemes. The Loan Charge APPG explore changes that could stop people from engaging with such arrangements in the future.

In their own words, the “APPG believes that this is of fundamental importance to avoiding another Loan Charge scandal and the best way ultimately to stop the promotion and use of so-called disguised remuneration schemes, as well as finally properly recognising contracting and freelancing in legislation.”

A quick summary of the reports “key findings”

  • IR35 is a major reason people have used unregulated payroll providers, including umbrellas and tax avoidance schemes.
  • There is a lack of a singular approved model which is why tax avoidance schemes have been engaged with. The Loan Charge APPG believe “a simple, clear model should be agreed for all professional self-employed contractors and freelancers”.
  • Recruiters are forcing umbrella companies to pay them in exchange for referrals. In some cases, temporary workers are being pushed towards payroll providers – just so recruiters can financially benefit. There is a lack of transparency which has raised concern.
  • The current self-regulation of the umbrella marketplace hasn’t stopped non-compliance within the sector.
  • The UK tax system is too complex, and the government need to do something about it.
  • The government should use data at their disposal better, and be more responsive to tax avoidance and non-compliance.
  • An official review is needed to look at professional freelancing and contracting in the UK.

Read the full report

You can read the Inquiry on ‘How Contracting Should Work’ by clicking here.

APSCo responds to the inquiry by the Loan Charge APPG

The Association of Professional Staffing Companies (APSCo), has shared their thoughts on the Loan Charge APPG’s report. If you’re unfamiliar with APSCo, they’re a well-established professional body that aims “to support, promote, and differentiate the provision of top-quality recruitment services in the professional staffing sector.”

Tania Bowers, APSCo’s Legal Counsel and Head of Public Policy, said the following about the Loan Charge APPG’s inquiry:

“We are supportive of the APPG’s summary and recommendations and agree that ministers, HMRC, BEIS and relevant Select Committees should review their recommendations as soon as possible. However, while we agree that the off-payroll reforms are misguided, we do not see Ruth Cadbury’s approach to the Finance Act amendments to be the best way of bringing change to the umbrella industry.”

Tania also shares her thoughts on the Loan Charge APPG’s views on the umbrella company marketplace:

“Many of the umbrella companies that our members work with – some of whom choose to join us as APSCo Trusted Partners – are experts in payroll and can offer contractors long term continuity of employment.  Although many staffing businesses can and do run agency payrolls offering workers “worker rights”, this is not necessarily better or indeed as good as the employment terms offered by compliant umbrella companies.”

Have you come across a new resource that’s worth sharing?

The UK Contracting Support Website is a free source of information for self-employed professionals in the UK. If you come across a resource that you think our readers could benefit from reading (just like ‘How Contracting Should Work’), please share it with us on Twitter or email info@ukcontracting.co.uk.

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