IR35 inquiry launched

Lords launch IR35 inquiry 

Contractors invited to contribute to IR35 inquiry 

The Lords Select Committee has announced it will investigate the proposed extension to the off-payroll working rules and called on the parties impacted by the reform to contribute to the IR35 inquiry. 

While scrutinising the Finance Bill 2019/20, the Lords Finance Bill Sub-Committee will focus specifically on IR35 reform, which will see contractors lose the right to determine their own IR35 status from 6th April unless they are engaged by a small private sector company.

With less than two months to go until controversial changes are enforced, Lord Forsyth of Drumlean, Chair of the Finance Bill Sub-Committee, said the Committee is “interested in how this change will work in practice, and how it relates to wider changes in working arrangements.”

Open until 25th February, the IR35 inquiry will take into consideration the opinions of contractors and businesses affected by the reform, as Lord Forsyth explained: “To inform or work we want to hear from as broad a range of people and organisations as possible. If you have a view on off-payroll working rules, please let us know what you think.”

The inquiry is being held while the Government conducts the IR35 review, which is also due to conclude this month. The Lords have said they will focus on a number of key areas.

Public sector impact 

The Committee will examine public sector IR35 reform which was introduced in 2017 and resulted in all public sector bodies becoming responsible for administering IR35 status. The Lords will ask the following:

  • What has been the experience of the new rules in the public sector?
  • What lessons have been learned from this experience, and how have they affected the Finance Bill proposals?

Impact of IR35 reform on businesses

With reports of risk-averse IR35 determinations and private sector businesses banning all contractors, the Lords will put the following forward for discussion:

  • Has the impact of the extension of the rules to the private sector been adequately assessed?
  • Is the exclusion of small organisations sufficiently robust?
  • What effect will these new measures have on a chain of contractors and sub-contractors?
  • What should HMRC do to help businesses understand the new administrative rules?

Ways to determine IR35 status

The failings of HMRC’s IR35 tool, CEST, have been well-documented, so it’s no surprise that the Lords will look closely at the current guidance for determining IR35 status:

  • Are the tests for determining employment for the purposes of these rules sufficiently clear to both engager and worker?
  • What is your assessment of the Check Employment Status for Tax (CEST) tool?
  • Does the CEST require improvement? If so, how might it be improved?

The news of the IR35 inquiry was well-received by experts, but it does not mean incoming reform will be scrapped or delayed. Additionally, when investigating the reform, Seb Maley, CEO of Qdos, made it clear that the Lords must consider the facts: 

“Has public sector reform worked? No, not when you consider that thousands of contractors were unfairly forced inside IR35. Is CEST capable? In its current state, it simply isn’t fit for purpose. What effect might IR35 reform have on contractors? If mismanaged, there is a risk the private sector will repeat the mistakes made in the public sector.”

For more information and to contribute to the ongoing IR35 inquiry, please visit the Parliament website here.


  • Andrew Z says:

    Companies will not want to carry the burden and will either class all their contracts as inside or simply not recruit. On top of the loan charge, it’s another kick in the teeth for contractors. This will severely impact the contract market, impacting contractors, companies AND the government.

  • Mark Fenton says:

    Organisations also do neither have the resources or wish to take the risk to evaluate whether a contractor is deemed to be inside or outside IR35, so they default to requesting contractors inside IR35 only.

  • Bill Gonnolley says:

    What does the government want to do? Kill the will of people working by finding every nook and cranny to tax people.

    The govt function is to create a viable working conditions, not jam the instruments (contractors) who do the work which perms can’t (long, irregular hours).

    Continue down this road and businesses will lose their ability to run, forget competing.

    Where does all this tax money go to, let us all ask this. Its our tax money, it must be spent wisely.

    And as for the MPs well time they pay more tax… You never find a broke MP do you.

    I don’t see a. Right future for us. Please someone wake up!!!

    • Stephen says:

      The money goes, in case you do not already know, into great infrastructure investments like building bridges from the arse end of nowhere to the arse end of nowhere.

  • Margaret says:

    I have felt very of my proud that I am a self employed hard working contractor. i have been motivated to keep my skills and experience up. i love that I feel more in control of my career, by choosing to pay for the training that i see necessary to allow me to stay on top of my game, choosing the number of days off i have per year, and very proud that through my own hard work and determination that i have always had contracts, Being a permanent employee has many benefits, but i feel a lot of the motivation to better myself as an individual is taken away from me. The government should be doing what it can to support the self employed contractors rather than putting up obstacles that is causing such a negative impact.

  • Andy says:

    Looking to working in Europe. Round of applause to the Govt & HRMC who have demonised Contractors, who by definition work long hours remotely from family and are now being penalised for getting paid !

    • Jon says:

      Good idea, I moved to Denmark 5 weeks ago for a consultant design role at a design consultantancy.
      Best desision I’ve made ever, I can continue to develop my company and invest on my own projects. I was getting so stressed out on the UK, I feel things are working out now for me in ways they wouldn’t have done in the UK.
      Good Luck

  • Philip says:

    I am retired now. At the age of 55 I was made redundant, the company I worked for closed down. Because of my seniority( I even represented one company on a United nations working party) I found it difficult to get a permanent job, .so I became a contractor.

    I was outside IR35
    Many companies were very happy to draw on my experience including JDA International, GE Capital Finance (Paris), Barclays Bank, British Telecom and even HMRC amongst others.

    At the age of 55 I could have given up and lived off the state! However because I worked, albeit as a contractor, I paid a lot of Tax – not only Corporation Tax but also VAT- which as an employee I wouldn’t have paid. I also had to fund various insurances, additional pension contributions, my business telephone etc, What the coming legislation doesn’t seem to understand, are the situations peculiar to a lot of people, that do not fit into the perceived HMRC/Government model of contracting.

  • Natasha says:

    Company’s have just taken a “blanket” approach to IR35. The company have elected to put every contractor inside IR35 to essentially de-risk themselves.

    IR35 or PAYE as it is DOES NOT offer any sick pay, company pension, share options, full typical employee rights, all discounted employee benefits, a three months notice period, time off in lieu, most business expenses paid, 25 paid holidays, family medical, company car allowance etc as a PAYE employee gets.

    They just want a contract to work for a rate that is pretty much half with no benefits whatsoever under PAYE.

    I actually can believe it. Organizations so be forced do a proper analysis of the IR35 status of their contractors.

  • CX says:

    What’s the point in contributing to yet another inquiry/review?

    They do this routinely, then they make it worse.

    This enquiry closes for submissions on 25th Feb, the budget is 15 days later, the changes come in 20 days after that, so how will anything change in that time?

    This is yet more pretending to address concerns while pushing on with people increasingly being nudged towards permanent employment. When you combine it with yet another concession to the business lobby, allowing unlimited numbers of people into the country as long as they earn more than a paltry £18k or £25k, we will see an influx of cheap labour from India etc further squeezing our livelihood.

    Brexit Party –> Reform Party. Then we may have something worth voting for.

  • Stephen says:

    I sent an email to as you suggested. However, I have no confidence that any heed will be taken of the views of individual contractors. It seems likely at thus stage that they have already decided what they are going to do and asking for our views is just going through the motions.
    It hardly feels worthwhile being self-employed these days, what with Corporation Tax, Dividend Tax and Personal Tax. Plus, the endless hours (and days) of unpaid work while seeking the next contract, no pay during holidays or sickness.
    Up to now, I have deliberately avoided taking on work “inside IR35”. Soon, that may not be possible.
    Maybe I’ll just retire and therefore contribute much less to “The Economy”.

  • Phil says:

    Dumb legislation to block a hole when nothing illegal has been happening. HMRC need to spend their limited resources on going after the Big Fish and planning for the Brexit Red Tape Mountain. They also need to look at the total revenue generated in a holistic way rather than just saying they are missing out on employee / employer NI. What about the increased revenue from dividends, savings, VAT due to more available wealth, stamp duty etc etc. Then they need to look at the costs they have already incurred in loosing legal challenges. Party of enterprise and business, not!

  • dunnit and gone says:

    I gave up on the IT industry due to ir35 a few years ago.

    After a degree and full time 20 year “career” in IT, it had to end. Rates dropped due to outsourcing (on- and off-shore), and with staying away from home I would ended up taking home £10 to £20 net per day. I gave up and now unhappily living off the b—-y state.

    The alternative would be a tax avoidance scheme, but the authorities say this is morally wrong. So how is it morally right to say that a contractor (no holidays, no sick pay, etc) is an employee “for tax purposes” regardless of the real situation, and further to deem that the employer’s NI is passed to the employee for safekeeping pending collection, so that the employer remains ignorant.

    This country sucks – illogical, greedy and corrupt. Banana republics are better.

  • SP says:

    I took redundancy in 2016, along with many, many others, from a large IT outsourcing company. I am older, but don’t wish to stop working.

    After a couple of interviews for permanent jobs where I felt unable to show enthusiasm when career progression was discussed, I realised that contracting was the only way forward.

    In the 3.5 years since taking redundancy, I have been unemployed for a total of 7 months.

    I’m currently contracting for a government department, inside IR35, living away from home and paying my expenses. I signed up for a 11-month contract only to be told that it would end after 4 months because a civil servant had been recruited to fill the role. In circumstances like these, how can contractors possibly be considered as disguised employees.

    If IR35 kills off contracting, with ageism rampant in the workplace, I can see myself being forced out of work. I don’t see how this is good for anyone, not even HMRC.

    • IR35 Victim says:

      So now agencies and clients smell blood and all of those permanent employees are stepping up to take revenge for the perceived slight of a contractor being recruited in the past.

      My current client is ending my contract role with a business wide blanket ban.

      The FTC they offered for 12 months was at 50% but now with 3 weeks to go they have cut that offered by another 33%.

      I can not afford to consult with them any longer, and so the work if the team is being move offshore to India.

      The £45k of vat and tax I paid to HMRC has now dried up and the Indian consultancy will pay £0 tax.

      I will find ageism will stop me from working in the sector I love.

      Thank you Conservative HQ for collapsing the freelance market, your promised unicorns with bags of new NI & Tax revenues will never arrive, your costs to support me and mine will rocket, truly a job well done.

      Yours unemployed knowledge based worker.

  • endgame says:

    they won’t see full effects until they try and resource major projects after the start date for applying the ir35 and contractors won’t travel for work as financially it will not justify living away from home and most major projects rely on this….good luck with HS2 etc….

  • IT Company says:

    We are a small IT business and despite of the company having 3 emoloyees being paid under PAYE, larger clients tell us we are inside for consultancy contracts.

    There is just no hope even if you are running a ligit business and are not a PSC.

    But who wants to listen? HMRC don’t want to help because the client has to decide now.

  • Ian says:

    I have worked in the rail industry for 44 years, the last 20 of which I have been a senior signalling contractor. I have proudly worked on major projects in this country and overseas in that time and have always dutifully paid my fair share of taxes; personal, corporation and VAT. To say that I am angry at the way HMRC is attacking small companies is an understatement in the extreme. We are an easy target, no more, no less! The real villains in tax avoidance are without doubt the likes of Google, Amazon, Starbucks, etc, but HMRC does nothing where they are concerned. I, for one, have no intention of working inside IR35 and if the attempt is made to force it upon me then I shall cease trading with the likes of Network Rail and trade where there is no such requirement.

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