A tabled amendment to the Finance Bill calling for IR35 reform in the private sector to be delayed until 2023/24 has been rejected, as the Bill passed without a division. This means the controversial tax changes are still set to be rolled out on 6th April 2021.
David Davis MP, who recently announced he was to propose that further changes to IR35 should be postponed by an additional two years Tweeted his thoughts shortly after the debate: “We were unable to vote on my IR35 amendment this afternoon as the House authorities did not select it. However, Labour were supporting the Government anyway, so we could not win – this time. Watch this space.”
In a session where Financial Secretary to the Treasury, Jesse Norman, reiterated his desire to introduce the changes next year to address the unfairness that he said currently exists, Mr Davis responded by quoting the recently published House of Lords report, that called for a widescale review of the legislation:
“They (the IR35 rules) have never worked satisfactorily throughout the whole of their 20-year history.”
“IR35 was the effect of reducing contractors to an undesirable halfway house and they do not enjoy the rights that come with employment yet they are considered employees for tax purposes. In short, they are zero-rights employees.”
Mr Davis then emphasised this point by stating: “That is zero-rights employees effectively created by the state, Minister.”
By ignoring the concerns raised not only by Mr Davis, but also several other MPs, including Sir Ed Davey, who said he was “beginning to fear this Government doesn’t understand the self-employed”, hopes of a longer delay have faded further.
These changes will see contractors lose the right to determine their IR35 status when engaged by medium and large businesses from April 2021. This responsibility will be handed to the contractor’s client, with the fee-paying party in the supply chain to be transferred the liability.
The news that the amendment was not voted on and that reform now looks very likely to be enforced is disappointing, albeit unsurprising, explained Qdos CEO, Seb Maley:
“It’s certainly disappointing that IR35 reform will not be delayed further, but it’s of no real surprise that the changes will go ahead. Many politicians have buried their head in the sand when it comes to the issue of IR35, while the Government has continually ignored compelling arguments that call for a rethink of the legislation. The Coronavirus crisis also means raising tax receipts has become a priority – even if that means contractors may be wrongly forced into ‘zero-rights employment’ as a result of the reforms.”
Given IR35 reform is now one stage closer to being included in the Finance Bill, Mr Maley urged private sector firms to continue preparing for what he described as “needless” and “short-sighted” changes:
“With less than a year until IR35 reform arrives in the private sector, businesses must continue their preparations. And companies that haven’t started yet must get to work. The businesses that have banned contractors altogether or blanket-placed these workers inside the legislation should reconsider their stance immediately.”
Meanwhile, Dave Chaplin, Director of Stop the Off-Payroll Tax campaign called on contractors to take up the issue with their MPs and continue the fight:
“Pressure has built as we head to the Committee and Report stages of the Finance Bill. We will continue to campaign on behalf of the UK’s contractors and freelancers to prevent the legislation entering statute in its current form. We do now, however, need thousands of contractors to engage with their MPs to turn this around.”