[UK] Chancellor urged to amend ‘flawed’ IR35 rules

IR35 changes came into effect this month, after a year of delays caused primarily  by the COVID-19 crisis. However, a report published by a group of MPs has raised potential issues surrounding the off-payroll working rules, Express reports. 

IR35 legislation is used by HMRC to evaluate whether a contractor is genuine or being used as a “disguised employee” for the purposes of paying tax. The Government said the changes ensure that everyone pays a fair tax contribution.

The All-Party Parliamentary Loan Charge Group (APPG) reportedly accepted the need to prevent tax avoidance but stated that the current legislation was unsatisfactory. The group believes the off-payroll reforms being rolled out into the public sector need to be reexamined during the passage of the Finance Bill this year.

The report continued, “The Treasury and HMRC should stamp out the abusive practices outlined in this report.

“All ‘inside IR35’ workers should get full rights under all legislation dealing with agency workers, with a clear and transparent right to holiday and sick pay.”

From the start of the new tax year on April 6, it had been the responsibility of public sector clients and medium to large-sized businesses to determine their workers’ employment status. The issue met with some backlash from employers fearing they were not entirely prepared or equipped for the new decision-making responsibilities.

The report also cited IT contractor, Andy Stokes. Mr Stokes expressed certain levels of concern with how the system operates.

He told the inquiry, “In addition, I have become concerned with the endless and continuous changes to the UK tax framework which are supposedly designed to address such avoidance issues, as well as items such as the fundamentally flawed ‘off-payroll’ regulations which are, supposedly, to introduce fairness into the tax framework.

“Such items are overly complex, detract from the core activities of business and in my opinion are damaging to the health and wellbeing of both individuals and the economy in general.”

Mr Stokes also addressed his dissatisfaction, saying many contractors and freelancers had been left “largely unsupported” during the COVID-19 pandemic. He said this issue came either from “lack of concern” or “lack of understanding” and a failure to recognise the role such workers play across the UK.

IR35 changes came into effect this month, after a year of delays caused primarily  by the COVID-19 crisis. However, a report published by a group of MPs has raised potential issues surrounding the off-payroll working rules, Express reports. 

IR35 legislation is used by HMRC to evaluate whether a contractor is genuine or being used as a “disguised employee” for the purposes of paying tax. The Government said the changes ensure that everyone pays a fair tax contribution.

The All-Party Parliamentary Loan Charge Group (APPG) reportedly accepted the need to prevent tax avoidance but stated that the current legislation was unsatisfactory. The group believes the off-payroll reforms being rolled out into the public sector need to be reexamined during the passage of the Finance Bill this year.

The report continued, “The Treasury and HMRC should stamp out the abusive practices outlined in this report.

“All ‘inside IR35’ workers should get full rights under all legislation dealing with agency workers, with a clear and transparent right to holiday and sick pay.”

From the start of the new tax year on April 6, it had been the responsibility of public sector clients and medium to large-sized businesses to determine their workers’ employment status. The issue met with some backlash from employers fearing they were not entirely prepared or equipped for the new decision-making responsibilities.

The report also cited IT contractor, Andy Stokes. Mr Stokes expressed certain levels of concern with how the system operates.

He told the inquiry, “In addition, I have become concerned with the endless and continuous changes to the UK tax framework which are supposedly designed to address such avoidance issues, as well as items such as the fundamentally flawed ‘off-payroll’ regulations which are, supposedly, to introduce fairness into the tax framework.

“Such items are overly complex, detract from the core activities of business and in my opinion are damaging to the health and wellbeing of both individuals and the economy in general.”

Mr Stokes also addressed his dissatisfaction, saying many contractors and freelancers had been left “largely unsupported” during the COVID-19 pandemic. He said this issue came either from “lack of concern” or “lack of understanding” and a failure to recognise the role such workers play across the UK.