Speaking at a Treasury committee hearing on 21st October, Mel Stride, who was instrumental in getting off-payroll reform over the line, has now apparently changed his stance, stating that it would be better if IR35 in its entirety was abolished.
He said: “Leading us all unfortunately to the dreaded IR35, I think we are all agreed this is best abolished as soon as possible.”
The IR35 legislation was introduced in 2000, with controversial reform in the public sector enforced in 2017. Further changes will arrive in the private sector on 6th April 2021, after having been delayed by one year due to the Coronavirus crisis.
Much like in the public sector, the reform will shift the responsibility for determining a contractor’s IR35 status from the individual to the medium and large businesses that engage them. As part of these changes, the risk will transfer from the contractor to the fee-paying party in the supply chain.
Following IR35 changes in the public sector three years ago, industry bodies criticised the reform for leading to widespread confusion and blanket IR35 determinations. However, the Treasury has maintained it was necessary to address the “fundamental unfairness” around non-compliance.
At the committee meeting in which Mel Stride said that IR35 should be scrapped, the impact of COVID-19 on the self-employed was also brought into sharp focus. Derek Cribb, CEO at the self-employed trade body IPSE, who was present, pointed out that millions of self-employed people have had very little to no government support during the pandemic.
He said: “We’ve seen half a million people falling out of self-employment in the last 6-9 months, according to ONS statistics [Office for National Statistics]. It seems slightly perverse to have the off-payroll legislation coming in when you want to encourage people to be flexible and to help the UK economy out of a crisis.”
This is not the first time that calls for IR35 to be completely reviewed have been voiced. In April of this year, the House of Lords published a damning report, which found that the changes to the off-payroll rules would put a great burden on businesses and were unfair on contractors.
It urged the government to rethink the tax rules, criticised the taxman’s controversial tool (CEST), which it described as “well short” of what is required, and said making businesses responsible for enforcing legislation that HMRC itself “struggled with for 20 years” was not right.
Attendees at the recent Treasury committee meeting, including IPSE’s Cribb, highlighted the disappointing response from the government to the report as well as its failure to implement the recommendations from the Taylor review in 2017.
Despite the calls for the abolition of these rules by Mel Stride, Dave Chaplin, CEO and founder of Contractor Calculator remains sceptical. He said: “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.”
Seb Maley, CEO at Qdos, added: “That Mel Stride of all people is calling for IR35 to be abolished is ironic, given he was one of the driving forces behind reform in the private sector. And anyway, it seems too little too late. The changes are set in stone and will be enforced on 6th April 2021 – the date upon which private sector businesses need to be in a position to assess IR35 status fairly.”