Government urged to reform off-payroll rules as inquiry into private sector changes is launched
The House of Lords Finance Bill sub-committee has launched an IR35 inquiry into the implementation of the new off-payroll rules in the private sector.
In the wake of the new probe, Lord Bridges of Headley, chair of the sub-committee, has told the government to conduct a “wholesale reform of IR35.”
The inquiry is a follow-up to the sub-committee’s report, Off-payroll working: treating people fairly, published in April 2020, which found that there were “inherent flaws” with the regulations.
IR35 reform has had ‘unintended consequences’
The committee is now inviting professional bodies, businesses and contractors affected by the changes to contribute to this IR35 inquiry.
IR35 reform, which came into force in April this year, shifted the responsibility of determining IR35 status from contractors to medium and large businesses.
Bridges said: “Our previous inquiry found the government’s off-payroll working rules to be riddled with problems, unfairness, and unintended consequences. We called for the wholesale reform of IR35.
“We’re carrying out this follow-up inquiry to find out about the experiences of engagers and contractors to date. We want to hear particularly from representative bodies about the experiences of individual contractors.”
First IR35 inquiry was ‘largely ignored’ by government
The move has been welcomed by industry experts who are calling on the government not to ignore the report.
Andy Chamberlain, director of policy at self-employed trade association IPSE, said: “The impacts of the IR35 changes in the private sector, implemented earlier this year, are already being felt.
“We have seen drastic shortages among HGV drivers and we know from IPSE’s research that many contractors in other sectors have closed their businesses as a result. We are therefore delighted the draft Finance Bill sub-committee will look at this issue in a follow up inquiry.
“The committee’s report prior to implementation was damning of the reforms, yet was largely ignored by government. We hope policy makers will pay more attention this time around and IPSE will certainly respond to the call for evidence.”
To provide evidence and contribute to the inquiry, please visit the government website.
In homage to the Monty Python parrot sketch, the Finance Bill Sub-Committee has called for evidence on how IR35 is working out for your contracting business.
I put in IT systems for large companies as one-off engagements, in a similar way you may employ a plumber to install a new boiler. I have no interest in taking on an employed role as ‘Chief Boiler Installer’ only to be made redundant without compensation after 6 months since the company only installs a new boiler once every decade. Equally my skills are not suited to becoming part & parcel of a company and playing the internal politics. I see only two types of roles in the market right now – those where they clearly want an employee to fill an ongoing role, and those to perform a specific one-off project task. These could easily be defined as employee or outside IR35 but all are coming through as inside IR35. Companies are too scared to treat an IT system installer the same as a boiler installer.
It would be like putting Trump in charge of running a free and fair election.
What are our chances of getting any sense out of these truth twisters let alone workable reform?
I don’t think Sunak’s father-in-law would be too impressed if the IR35 reforms were reversed/dramatically changed. The family has done very well out of them.
I have a small business that pre lockdown was 4-5 people. Unfortunately due to lockdown we have had to let go our highly skilled-highly trained staff!
Which leaves me and my partner
We have work ref CADCAM services the company has been trading for over 25 years
Due to our specialised work we have a very small client base NOW because there is only 2 of us we do more than 25hours for one customer!!!
This we have been told puts us in IR35 category
This is singly finishing our company we have built over 25 year
Clearly this is set-up to destroy small businesses !!!!
@Phillip – I’m no tax lawyer but have similar small business experience. Had many IR35 issues to think about over the years but never heard of any working time criteria that puts you inside IR35. Maybe get some expert advice.
There was the > 2 year contract rumour which didn’t hold any water.
@Johhny/Philip – I think its a reference to the number of concurrent clients / contracts – the exclusivity test for masked employment (still ridiculous)
Another HoL enquiry will just be ignored by govt. Last time they commented weeks later, simply saying “We think they’re wrong”.
The solution to all this nonsense is to do away with Employers NI, then everyone is just a worker, doing some work for pay and being taxed the same. Not more artificial “employment statuses” and no more court cases, red tape etc.
Look, it’s so friggin’ simple…
Let consultants and the companies that hire them determine their own rates, with the understanding that a freelancer — however long they’re hired — are not employees, and are therefore not entitled to sick pay, maternity pay, or benefits offered to other employees.
Consultants/freelancers are well aware of the trade-offs. If they want employee ‘benefits’, they can elect to become employees at companies that are looking for permanent staff. If they want the freedom and choice of working for one or many clients, dictating their own schedules and setting their own income goals, they can pay company or self-employed tax and NI, without the safety net of employees.
It’s a fair trade-off for everyone. The potential to make more money, with the increased risk of having to chase potentially more clients, more often, and cover your own costs and sick days. Simple.
I left the UK and thankfully am no longer beholden to a government that’s intent on introducing hurdles in the name of income normalisation. I have clients worldwide, who pay me exactly what I put on the invoice. I accept the trade-off that not working = not earning. That’s fine and I prefer it. The fact that this isn’t a simple option in the UK puts it at a massive competitive disadvantage with many other countries in the world!
You’ve hit the nail on the head, particularly the last sentence.
We in the UK are trying to work under a massive competitive disadvantage while our offshore rivals are not.
Has anyone else noticed how all the wastewater engineers have left the contract market? More of a slow burn problem than the HGV drivers but we’re now swimming in raw sewage.