IR35 Reform Criticised as ‘Perverse’

27th October, 2020
By 27. October 2020COVID-19, IR35, News
IR35 Reform Criticised as ‘Perverse’

The infamous IR35 rules have yet again come under fire during a Treasury Committee session last week. The Treasury Select Committee addressed how the UK taxation regime may need to change to accommodate the considerable increase in government borrowing caused by the coronavirus pandemic.

The roll-out of the delayed IR35 reforms in April 2021 was touched upon several times during the session. Experts were asked for their views on how the UK government should set about balancing the books post-pandemic.

According to the government’s own figures, the roll-out of the IR35 tax reforms will raise an additional £4.1bn in previously unpaid taxes by the 2024-25 tax year, at a time when the Chancellor will be looking for ways to alleviate the national debt.

However, industry experts and stakeholders all voiced strong opposition to the legislation. Derek Cribb, CEO of IPSEC, said the government would be ill-advised to direct its tax revenue-generating efforts at the self-employed, given how difficult the last few months has been for this sector, stating:

“We’ve seen half a million people falling out of self-employment in the last six-to-nine months. Normally in a time of economic crisis, you would see more people going into self-employment, but we’re seeing absolutely the opposite,” said Cribb. “It seems slightly perverse to have IR35 coming in when we want to encourage people to be flexible and to help the UK economy.”

Cribb also alluded to the Lords report which found serious faults within the IR35 legislation, stating: “I’m a great fan of that report. I’m just surprised it wasn’t listened to particularly by government.” He also referenced the recent confusion over the wording of the legislation regarding the ‘intermediary,’ which is likely to mean adjustments to the primary legislation.

In an about-turn, former Financial Secretary to the Treasury Mel Stride also called for the abolition of the IR35 Off-Payroll reform. Stride, who helped usher in the extension of the Off-Payroll legislation to the private sector, referred to “the dreaded IR35”, stating, “I think we all agree that it is best abolished as soon as possible.”

Despite such strong views, Dave Chaplin, director of the “Stop The Off-Payroll Tax campaign,” warned against contractors getting their hopes up: “Everyone has been talking about the need to do away with IR35 for 20 years. This is nothing new. Unfortunately, the political will isn’t there to change matters, even if the potential outcome is a functioning tax system,” he said.

This content has been supplied by IR35 Guru

Contractors and businesses are now advised to use the remaining time until April 2021 to prepare for the changes ahead. If you’re looking for more information on IR35, our free comprehensive guide gives you a clear overview of the legislation to date. ContractingWISE has a range of options to help you keep your contracting career on track. To talk to a member of our team, call: 0203 642 8679