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'Hasty' and 'meaningless': Industry responds to IR35 review

'Hasty' and 'meaningless': Industry responds to IR35 review

The government has launched a review of the proposed changes to off-payroll working rules, pledging to ensure a “smooth implementation” of the reforms planned for April but the industry has branded the effort "inadequate".

HM Treasury announced today (January 7) it has launched its previously announced review of the changes to off-payroll working rules — more commonly known as IR35 — in a bid to address any “concerns” from businesses and affected individuals about how the rules will be implemented.

The review will determine if any further steps could be taken to ensure the smooth implementation of the reforms and whether any additional support is needed to ensure that the self-employed, who do not fall into the rules’ scope, are not impacted.

But the review has been branded “meaningless” by some in the industry who claim it will not tackle the key problems surrounding IR35.

Andy Chamberlain, deputy director of policy at IPSE (the Association of Independent Professionals and the Self-Employed), said: “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."

IR35, which was introduced in 2000, is an anti tax avoidance rule that applies to all contractors and freelancers who do not fall under HM Revenue & Customs’ definition of being self-employed.

From April 2020, every medium and large private sector business in the UK will become responsible for setting the tax status – or IR35 – of any contract worker they use, as is already the case in the public sector.

But businesses and contractors have criticised the proposals, saying the new rules would increase a business' contractor costs by up to 14 per cent and would limit the tax freedom currently enjoyed by the self-employed.

Tim Stovold, partner at Moore Kingston Smith, said today’s announcement would be a “disappointment” to those businesses who were expecting a wider review of the IR35 reforms, adding the government would not have enough time to actually implement any changes.

Seb Maley, chief executive of IR35 specialist QDOS, agreed, saying it seemed as if the government had “every intention” of rolling out the changes “irrespective of any findings”.

He said: “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.”

Chief executive of the Freelancer and Contractor Services Association, Julia Kermode, said this was “another meaningless review” which did not focus on the reforms themselves.

She added: “I fear that today’s pledge is simply the government paying lip-service to empty election promises and nothing short of an insult.”