Former Lord Chancellor calls for an end to IR35, but industry experts accuse government of hypocrisy
A senior Conservative MP has urged the government to scrap IR35 reform to win back voters ahead of the UK’s next general election.
Robert Buckland, MP for South Swindon, put forward his views in an article on Conservative Home on the 12th July, calling the rules “something of a Frankenstein’s monster” and stating that “there is no better time to slay it”.
Buckland, who has also served as the Lord Chancellor and Secretary of State for Wales, suggested that killing off the rules would be “an act of political expediency”.
With the UK set to head to the polls no later than 28th January 2025, IR35 has been identified as a source of frustration amongst voters – particularly among the Conservative party’s “hardest” support.
Rules have become ‘Frankenstein’s monster’
While stating that the rules were “nobly intended to tackle tax avoidance”, Buckland believes that the legislation’s “burdensome and complex nature mean it has become something of a Frankenstein’s monster”.
“The deleterious impact it has had on dynamism, entrepreneurship, jobs, and growth means that there is no better time to slay it once and for all”, he said.
“One of the most immediate problems with IR35 is the treatment of contractors as “disguised employees” for tax purposes.
“This discourages independent professionals from taking on projects and limits their ability to negotiate terms and work arrangements freely”, he concluded.
Buckland also noted that the rules are “a double-edged sword”, as IR35 also “places a corresponding administrative and financial burden on businesses that engage with contractors”, he said.
“The ambiguity of the rules makes it difficult for employers to make accurate determinations”, Buckland continued, which often leads to “costly investigations and legal disputes”.
The result of reform has been a “lack of flexibility”, Buckland says, and complying with the rules “stifles innovation and prevents enterprising individuals from operating in a way that allows them to realise their full potential”.
IR35 was “blindly waived through Parliament”
Speaking to Accountancy Age, Dave Chaplin – CEO of IR35 Shield, a compliance firm – labelled the government’s inconsistent attitude towards IR35 as “embarrassing”.
“Here we have one more Tory calling for the abolition of a policy that they voted in themselves, against unanimous opposition, only three years ago.
“They were warned about the damage that the new version of IR35 would inflict, but those warnings were ignored as the legislation, proposed by Treasury and HMRC, was blindly waived through Parliament by Conservative MPs”, he said.
Julia Kermode – CEO of PayePass, an umbrella compliance specialist – also spoke to Accountancy Age. She pointed out that the introduction of the off-payroll rules had led to a “proliferation of non-compliant tax avoidance schemes” operating in the guise of compliant umbrella companies.
This saw many contractors left with no choice but to operate via umbrella companies – an industry which remains unregulated and where tax avoidance schemes are commonplace.
“These dodgy operators saw an opportunity to advertise their services to firms that transferred contractors onto the payroll as a result of the reform”, Kermode said.
“This government – and whichever political party wins the next general election – must take swift action to stop these firms, which result in massive tax avoidance”, she concluded.