Issues around off-payroll working rules are likely to continue to rear their head next year as demand for sparse skills increases.
Matt Fryer, an employment expert and managing director of Brookson Group, believes the growing pipeline of North Sea projects means “access to the flexible workforce” will be “more important than ever” for in 2023.
From decommissioning to offshore wind, there is a “lot of potential for the industry” next year as efforts to secure energy supplies continue, he said.
Numerous projects are expected to reach financial close, though uncertainty within the sector remains, especially due to the recent ramp up of the windfall tax.
As such, adhering to off-payroll working rules, otherwise known as IR35, will be “key”, Mr Fryer said.
© Supplied by DCT MediaHe added: “2023 holds a lot of potential for the industry: from offshore decommissioning to North Sea exploration, new investments by Shell and a drive for renewables announced in the budget. However, the uncertainty continues. Several North Sea investments are currently under review as a result of the windfall tax.
“With many projects yet to get the green light, access to the flexible workforce will be more important than ever. Key to this will be compliance with the off-payroll working rules. By offering compliant contractor roles, energy companies and their suppliers can adapt to quickly scale their workforce up or down to meet requirements.”
Fully implemented in April, after a year’s soft-landing period, IR35 reforms are designed to ensure workers, who carry out the role of a normal employee, pay the usual amount of tax, rather than that of a contractor.
Since the changes, it has been companies’ responsibility for deciding which banner its freelancers come under, with lofty fines for getting it wrong.
While the government says the move will close tax loopholes, the rules have been criticised for being overly complex.
Data has shown the reforms have led to a contraction of the UK’s contractor workforce, just as it tries to deliver countless energy projects.
During Liz Truss’ time in Number 10 plans were announced to scrap the reforms, but they were subsequently scrapped when she left office.
© PAA recent report published by Westminster found half of “group-level organisations” found it quite easy or very easy to comply with the new working rules, but experts have claimed the study paints a misleading picture.
Dave Chaplin, chief executive of and founder of tax compliance firm IR35 Shield said: “HMRC has published the results of its own findings into Off-payroll working – it seems to me that more research in pursuit of justifying the punitive Off-payroll legislation is a desperate task by HMRC and smacks of the lady doth protest too much.
“Moreover, many of the stats do not seem to tally with the externally commissioned report. The impact statement was miles out in terms of costs. The original impact statement suggested that the number of workers affected was 170,000. Now, HMRC claims it is 130,000.
“In addition, HMRC claims the reform has generated an additional £1.8 billion between October 2019 and March 2022. The impact statement indicated that in the first year, post-implementation, the legislation would command £1.165bn – therefore, it has made £700 million. How does that add up when fewer people were apparently affected by it?
“HMRC estimates that client organisations have incurred an overall one-off cost of £90m to £230m to implement the reform. Clients have also spent a further £150m to £370m in the first year on operating the rules, which HMRC expects to diminish over time. There are around 40,000 medium or large client organisations in the UK. HMRC’s impact statement estimated total costs for firms to be £14.4m.
“I would suggest that HMRC was out by either 6-fold or 16-fold. Either way, HMRC was miles out. Firms are spending 74 times HMRC’s estimated cost to run Off-payroll. And, the report suggests that HMRC is blaming hirers for spending, in its view, too much money on IR35 compliance! This is an appalling attempt by HMRC to spare their own blushes at getting the impact numbers so wildly wrong. It is high-time HMRC admitted that Off-payroll working is simply not!”
You can read more from Matt Fryer here.