The contract market has weighed in on promises to review IR35 rules if Lease Truss becomes Prime Minister

The contract market has weighed in on promises to review IR35 rules if Lease Truss becomes Prime Minister

Deal market stakeholders have expressed skepticism in response to Conservative leader candidate Liz Truss’ promise of a review. IR35 tax avoidance rules If he succeeds Boris Johnson as Prime Minister.

In a newspaper interview published at the weekend, Truss – who is currently foreign secretary, but previously held the role of chief secretary to the Treasury – said he would order a review of the IR35 rules because they were forcing genuinely self-employed people to pay too much tax.

IR35 rules and how they work in the public and private sectors have been reformed in recent years, with the government introducing changes that mean contractors are no longer allowed to decide for themselves how they should be taxed based on the work they do.

Instead, this decision-making responsibility has shifted to public and private sector organizations that employ contractors, who are instructed by HM Revenue and Customs (HMRC) to use “reasonable care” when determining whether a contractor’s engagement falls within or outside the scope. to do of IR35 rules.

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 Pay-As-You-Earn (PAYE) and National Insurance Contributions (NICs). Where an outside IR35 determination means the contractor is taxed as an off-payroll worker.

A major and recurring criticism of the rules is that while contractors are taxed in the same way as employees within IR35, they are not liable to receive the same workplace benefits, such as paid sick leave or holidays.

As a result, concerns have arisen MPs and campaign groups that this is contributing to an increase in the number of zero-entitlement workersWhatever Truss said sunday sun He is proud.

“The changes that have been made to IR35 are about trying to treat the self-employed in the same way as big businesses,” he said. “But the fact is, if you’re self-employed, you don’t get the benefits of being in a big company. You don’t get paid vacation. You will not get this benefit. The tax system should reflect this more.

He is said to have rallied against the unfairness of the rules, as they force the truly self-employed to pay too much tax, so – for this reason – he has promised to review the rules when he comes to power.

“We had reviews before and none of them did anything meaningful. This review will be radical and real change. Nothing should be off the table, including the complete repeal of this appalling law.”

Andy Chamberlain, IPSE

The pledge has been cautiously welcomed by the contracting community, however – Given the number of times the IR35 rules have been subject to official review, no changes have been made over the years – Expectations are low among industry watchers about what that might mean.

Andy Chamberlain, director of policy at The Association of Independent Professionals and the Self Employed (IPSE), said the organization would welcome a review of the IR35 rules, which he said were “destroying businesses and holding the economy back”.

He added: “While it is positive to hear that Mrs Truss has acknowledged the need to look again at IR35, we have carried out reviews before and none of them have led to anything meaningful. This review will be radical and real change. Nothing should be off the table, including the complete repeal of this appalling law.”

Dave Chaplin, CEO of tax compliance firm IR35 Shield, echoed these sentiments and said that while it was “good to hear” that the truss was meeting the needs of small businesses, another review of the IR35 rules was unnecessary.

“We don’t need more reviews, we need action. The so-called reforms are flawed rhetoric and have only served to strangle contractors and the businesses that hire them,” he said. “IR35 is an iron chain, preventing flexible workers who could help the UK economy and UK plc grow at a time of need. Now is the time to act.”

Responsibility for deciding how contractors should be taxed has shifted to end-employing agencies Extensive reporting in recent years about firms issuing blanket determinationswhereby all contractors they employ are directed to work within IR35.

at the same time, There are also reports of companies banning the use of contractors purely as a means of imposing on them the additional administrative burden of reforms, which This has made it difficult for some contractors to find work.

The best thing Truss could do if it comes to power is to scrap IR35 altogether, Chaplin said. “Over the past 20-plus years, the contracting sector has seen enough misjudgment and damaging legislation and the sensible option would be to go back to the drawing board and design a fair tax system that works fairly for everyone – the government needs to fix it or ditch. to do,” he added.

Meanwhile, Seb Maley, CEO of contracting authority Qdos, said news of the IR35 review was a “promising” development if done properly.

“It is widely recognized that the IR35 legislation and the way HMRC applies it is fundamentally flawed. If Liz Truss becomes Prime Minister she must prioritize a review. But it must not be lip service or vote-winning tactics.”

Seb Maley, Qdos

“It is widely recognized that the IR35 legislation and the way HMRC applies it is fundamentally flawed. If Liz Truss becomes Prime Minister she must prioritize a review. But this must not be lip service or a ploy to win votes from contractors for whom IR35 remains a huge issue,” said Maley.

“It’s impossible to ignore that we’ve been here before. IR35 has been reviewed several times in recent years, yet the government has taken little or no action. So you would forgive contractors and businesses affected by the rule taking lease truss commitments with a pinch of salt.”

And if the review is implemented, as promised, it will have to be conducted by an independent third party and be far-reaching, he added.

“HMRC’s own IR35 status tool is unreliable and inaccurate, which is a major risk to compliance. However, the law is forcing true self-employed contractors into zero-rights employment – ​​a situation where they pay taxes as employees but receive no employment rights in return. Having specialized in this legislation since its inception in 2000, Qdos stands ready to contribute to any review,” added Male.



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