house of lords

Government rakes in £1.5bn per year through IR35 

House of Lords peer slams government over “insidious” IR35 and growing tax burden

Lord Bridges of Headley, a Conservative peer in the House of Lords, has called on the government to rethink its approach to taxes.

Speaking in the House of Lords, Bridges – a vocal critic of the off-payroll rules – called IR35 an “insidious policy” and noted that it had raised £1.5bn per year in tax revenue, or “double previous estimates”.

The remarks came as part of his response to the Spring Statement on the 15th of March. Alongside this, Bridges criticised the government for the fact that “the tax burden is set to reach an all-time post-war high”. 

As a result of the increased tax burden, there will be 3.2 million new taxpayers, and 2.1m taxpayers in the higher rate tax band, he said.

Bridges also turned on the “damage done by the rise in corporation tax”, saying that the business tax landscape threatened to “snuff out the enterprise, innovation and investment we need to power growth”.


Headley’s history of IR35 criticism

Lord Bridges of Headley is currently the Chair of the Economic Affairs Committee, a body that puts forward recommendations to the government. During his time in the post, the Economic Affairs Committee has published reports that are critical of IR35.

2020 report concluded that the IR35 rules “have never worked satisfactorily” and that the “framework is flawed”. 

In his remarks about the report, Lord Headley found “the Government’s off-payroll working rules to be riddled with problems, unfairnesses, and unintended consequences”, as well as calling for “the wholesale reform of IR35”.

In a separate report from 2022, the Economic Affairs Committee found that IR35 had increased the use of umbrella companies and the risk of tax avoidance for workers – concerns echoed in the Labour Market Enforcement Strategy that was submitted to the government in March 2022. 

At the time, Bridges highlighted the failure of IR35 to prevent tax avoidance and called on the government to “protect workers from ‘rogue’ operators as a matter of urgency”.

More recently, he also gave the Growth Plan – the emergency mini-budget put forward by Liz Truss – his “full support in calling time on high taxes, not just corporation tax but also the dreaded IR35”.


Real-world impact of IR35 is severe

Responding to Lord Bridges’s comments, Andy Chamberlain – Policy Director at IPSE – said that he was “right to highlight the impact of IR35 as part of our tax burden”.

“Whilst some – particularly HMRC – will see IR35’s prediction-busting yield as a sign of success, those who monitor its real-world impact understand that this is merely a symptom of the government’s broken approach”, he said.

Chamberlain also questioned HMRC for failing to “take steps to ensure clients are assessing their engagements with due care”, citing IPSE research that “suggests this is not happening in many cases”.

“IR35 has already convinced many contractors to take their services abroad or to retire early, having decided contracting in Britain is no longer worth the hassle.”

“If government is serious about growing the economy and bringing experienced retirees back into the labour market, it must look at how its own rules are making it harder for people to do so on their own terms”, he concluded. 

1 Comment

  • Adrian says:

    Completely agree, and I must say I am one of the ones to take his services abroad. I no longer live in the UK. I live – and pay my taxes – in Spain, and funny enough, even though Spain is supposed to be a high tax jurisdiction I pay significantly less than what I paid under IR35 – which was circa 55% all things considered.

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