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Government’s IR35 review is 'disappointingly hasty and inadequate'

3-minute read

Lauren Hellicar

17 January 2020

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The government has launched an eagerly awaited IR35 review but it's received an immediate backlash from the self-employed sector.

Why does Julia Kermode, chief executive of the Freelancer and Contractor Services Association, “fear that today’s pledge is simply the government paying lip-service to empty election promises and nothing short of an insult”?

Read on for more reactions from key industry figures.

What's led to this review?

IR35 was first introduced in 2000. Its purpose is to prevent tax avoidance by contractors and freelancers who don’t fit the HMRC definition of being self-employed.

Public sector reform to the IR35 rules was introduced in April 2017. The reforms make the hiring client responsible for determining the tax status of any contract worker they use. From April 2020, these changes will also apply to medium and large private sector businesses in the UK.

IR35 reform has faced many criticisms since it was first drawn up, including that it’ll increase the amount businesses need to spend on hiring contractors by 14 per cent, reports FT Adviser.

What’s the latest review trying to achieve?

The aim of this review is to address “concerns” about how the IR35 rules will be implemented. Treasury minister Jesse Norman has said: “The purpose of this consultation is to make sure that the implementation… is as smooth as possible.”

It appears to be an opportunity to find out whether anything else can be done to make sure the planned changes don’t cause too much disruption. It’ll also look at whether there's more support needed to make sure self-employed people who fall outside IR35 aren’t affected, reports the FT.

But it won’t look at whether the changes should be happening in the first place.

Why is the industry saying the review is ‘inadequate’?

Some important figures from within the contractor and self-employed sector don’t believe the review will deal with the real issues surrounding IR35. Here’s what they have to say.

Andy Chamberlain, deputy director of policy at IPSE (the Association of Independent Professionals and the Self-Employed)

“The review announced today is disappointingly hasty and inadequate.

“Not only has the government not said it will pause the changes, it has also allocated far too little time for a full review and said nothing about selecting an independent chair.

“Such a limited review would leave the freelance sector floundering."

IPSE also said: “The government must urgently reconsider. It must give more time for a full review that includes an impact assessment of the changes in the public sector and the likely effects on the private sector.”

Tim Stovold, partner at Chartered Accountants firm Moore Kingston Smith

The government’s announcement is a “disappointment” to the businesses expecting a wider review of the changes to IR35. He also said there isn’t enough time for the government to implement any changes that may come out of the review.

Seb Maley, chief executive of IR35 specialist Qdos

“That HMRC is still under the illusion that IR35 reform only affects those ‘working like employees’ also shows just how out of touch the government is with regards to the true impact of the changes.

“The government also claim those who don’t comply with IR35 pay significantly less income tax and NICs than an equivalent employee.

“This is misleading. HMRC must stop painting the picture that it is the worker dodging tax.”

He had this advice for those affected by IR35: “Businesses, contractors and recruiters should take today’s announcement as solid confirmation that the legislation will be coming into effect this April, as planned.

“The wording of the [Treasury] statement clearly indicates that there will be no last-minute policy U-turn. Anyone who has not taken the necessary action to prepare yet, should do so now.”

Julia Kermode, chief executive of the Freelancer and Contractor Services Association

It’s “another meaningless review” which doesn’t focus on the reforms themselves.

Do you agree?

What are your thoughts on this latest IR35 development? Let us know in the comments below.

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