House of Lords ‘eye-opening’ report exposes flaws in IR35

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House of Lords 'eye-opening' report exposes flaws in IR35

The House of Lords has released a report which explores the roll-out of IR35 and “exposes the many flaws in the Government’s plans.”

The report named ‘Off-payroll working: treating people fairly’ which was published on the 27/04/20, urges the Government to look in to the IR35 flaws, and that a decision should be made in six months whether or not to enforce the delayed reforms in the private sector in 2021.

The report is 67 pages long and comes from the Finance Bill Sub-Committee which was announced on the 04/2/20, and has a specific focus on the extension of off-payroll working rules.

Lord Forsyth of Drumlean, chair of the Lords Finance Bill Sub-Committee said:

Our inquiry found these rules to be riddled with problems, unfairnesses, and unintended consequences.

The potential impact of the rules on the wider labour market, particularly the gig economy, has been overlooked by the government. It must devote time to analysing all of this. A wholesale reform of IR35 is required.

In March, the extension of IR35 to the private sector has been delayed by a year, due to the uncertainty COVID-19 has brought with it.

However, in relation to this point Lord Forsyth said:

The rules were deferred for a year because of the current crisis, but how prepared will businesses recovering from the crisis be to take on this extra burden on next year?

Seb Maley, CEO of Qdos, who offers insurance and tax advice for the self-employed said:

This report is eye-opening and exposes the many flaws in the Government’s plans for IR35 reform in the private sector. It makes the point that under the cloud of Coronavirus uncertainty, to commit to rolling out the changes in 12 months – albeit a year later than first planned – would be foolish. The seriousness of the Coronavirus pandemic means the goalposts may need to be shifted again. The Lords have made the right call, urging the Government to reassess things further down the line when contractors, businesses and the UK economy can see a way through this crisis.

The Lords are correct to question the proposed reform and also the IR35 legislation in its entirety, making the point that the Government needs to make wholesale changes to these needlessly complex rules. Expecting contractors who are placed inside IR35 to work as ‘zero-rights employees’ is unrealistic, not to mention unjust and unfair. Tax status and employment rights must be aligned before the changes arrive, to at least hand contractors who pay employment taxes something in return.

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