Contractors lack confidence in PM with promised IR35 review

Contractors lack confidence in PM with promised IR35 review

The contracting community fears new Prime Minister Liz Truss’ promise to review IR35 tax avoidance reforms is an “empty promise”, according to a survey by contracting authority Qdos.

Of the nearly 480 contractor respondents who took part in the survey, 94% said they felt the proposed IR35 review was an “empty promise”, while 5% said they trusted Truss to deliver on its promises.

Truss became Prime Minister on Tuesday 6 September 2022 and, during the Conservative Party leadership campaign before his appointment, He has publicly committed on at least two occasions to review the IR35 rules if he succeeds Boris Johnson..

How the IR35 rules work in the public and private sector has undergone reforms in recent years, with the government introducing changes that mean contractors are no longer allowed to decide for themselves what work they are based on and how they should be taxed. performed

Instead, the responsibility for making these decisions has shifted to public and private sector organizations that engage contractors due to concerns raised by HM Revenue and Customs (HMRC) about allowing contractors to decide for themselves whether their role was within or outside the scope of the IR35 rules. Contributed to tax evasion.

An internal-IR35 determination means contractors are treated as employees for tax purposes, meaning they must pay the same tax as a permanent employee. This means they are liable to pay-as-earned (PAYE) and National Insurance Contributions (NICs), whereas an outside-IR35 determination means the contractor is taxed as an off-payroll worker.

A major and recurring criticism of the rules is that although in-IR35 contractors are taxed in the same way as employees, They are not entitled to the same workplace benefits, such as paid sick leave or vacation.

As a result, MPs and campaign groups have expressed concern that this is contributing to an increase in the number of zero-entitlement workers. Although anecdotal evidence suggests that the legislation has also contributed to a “brain drain” of IT contracting talent outside the UK..

Truss has promised to review IR35 rules during an interview with a national newspaper published on 22 AugustClaiming they were forcing the genuinely self-employed to pay too much tax, a meeting of the Croydon branch of the Conservative Party on August 18 had made similar promises the day before.

The promise has been greeted with a fair degree of skepticism by contracting market stakeholders, who say previous reviews of the rules have done little to address the problems and impacts caused by IR35, and it seems the contracting community is similarly skeptical that anything will change. the time

In this regard, Qdos said, the poll results demonstrate how far the Trust and the Conservative Party are ahead of them in regaining the confidence of the contractor community.

Seb Maley, CEO of Qdos, said, “The real majority of people have no confidence in the new Prime Minister just to review IR35, let alone fix the fundamental flaws in the law. “Contractors’ confidence in the government to do the right thing on IR35 is probably at an all-time low.

“I’m not surprised though. There have been countless reviews, suggestions and inquiries about the IR35, some of which have resulted in changes or improvements. Even the findings of the House of Lords have fallen on deaf ears, with the Government ignoring many valid and constructive recommendations to make this complex legislation fairer.

“Furthermore, the fact that so few people – whether contractors or businesses – believe that a review will be carried out will provide food for thought for the new Prime Minister.”

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