Executive Grapevine | Executive Grapevine International Ltd

As the tensions around off-payroll taxation continue to play out, could it be that recruiters are the knights in shining armour?

A typically English drama

According to Dave Chaplin, Founder and CEO, ContractorCalculator, the current impact of off-payroll rule changes to contractors and freelancers is not unlike the twists and turns one might expect in a very British soap or drama.

The tax-specialist honcho believes HMRC’s “unfair” legislation is pitting contractors, clients and agencies against each other as they battle to understand and apply the rules.He explains that the tensions between these three groups is playing out in ways that aren’t too dissimilar from storylines in Shakespearean plays, Eastenders episodes, and Oscar-nominated movies. In fact, Chaplin believes that these three groups now fit into the roles of victim, persecutor and rescuer. Something which psychologist Stephen Karpman defined as being particularly unhealthy.

Karpman defined such unhealthy roles as the Karpman drama triangle, comprising three key positions: victim, persecutor and rescuer. Chaplin says: “The triangle is toxic but helps us to understand the off-payroll IR35 reforms and how they are damaging previously amicable relationships between businesses, agencies and the self-employed.”

While off-payroll continues to enable and encourage all parties to persecute each other, acknowledging one’s role won’t resolve anything.” Chaplin added: “It is the mother of all drama triangles.”

So, which group falls into which category? Chaplin lays it out in the triangle format, the client, maybe not by choice, plays the role of the persecutor. Clients have found themselves reluctantly in the middle, now responsible for assessing a contractor’s IR35 status and facing the threat of significant tax and penalties if HMRC challenges an ‘outside IR35’ assessment. Contractors, perhaps obviously, are the victims. 

He explains: “It has meant that clients have persecuted contractors by issuing blanket bans and refusing to engage any contractor who is outside IR35 even when a clear contract for services exists.  Some public sector clients have further persecuted contractors by deducting their own employer’s National Insurance (NI) liability from the contract fee to offload their own new tax bills. Similar tactics have been used to reduce the amounts paid out.” 

So, who’s the rescuer? Well, it might be that recruiters are the middlemen who exist to keep all parties happy. Chaplin explains: “If off-payroll stays the same, the solution lies with the agencies. They can be the knights in shining armour. Open communication is key if recruiters want to continue to attract top talent and maintain a healthy supply chain. The message from both agencies and contractors is clear – if clients want access to talent they will have to accept the tax risk or extra costs that comes with off-payroll.”

It means that, from Chaplin’s comments, recruiters can infer that to be the rescuers in this drama, they should be up front about the costs of securing top talent and the risks clients may have to take. Otherwise it might be that when they look in the mirror they’re not quite the hero they expected they were.