The former leader of the House of Commons, Mel Stride, has called for the abolishment of the “dreaded” IR35 tax rule.
During a Treasury Committee meeting on the 21st October, Mel Stride announced his view that the new off-payroll working rules should be abolished.
Nearing the close of the meeting, Mr. Stride stated:
Leading us all unfortunately to the dreaded IR35, I think we are all agreed this is best abolished as soon as possible.
The IR35 rules are set to be reformed in April 2021, with incoming changes stating that organisations that receive an individual’s service will have to decide whether the IR35 rules apply.
These changes were initially meant to be introduced in April 2020 but have been delayed by a year to allow businesses to cope with the impact of the COVID-19.
In October 2020, HMRC warned businesses that they need to be prepared for the upcoming changes. In particular, the body encouraged medium or large sized organisations which engage contractors who work through their own intermediary, employment agencies which supply contractors who work through their own intermediary, public authorities (who will face additional changes from April 2021) and contractors who provide services through their own limited company or other intermediary, to be ready for these changes.
However, research has shown that three-quarters of contractors do not believe their client will correctly determine IR35 once the changes come in. A further 21 per cent were unsure.
Despite this, Dave Chaplin, Chief Executive of Contractor Calculator and who created the Stop Off-Payroll Tax campaign, told the Financial Times he did not believe IR35 was going to be abolished due to Mr. Stride’s comments.
Mr. Chaplin stated:
Everyone has been talking about the need to do away with IR35 for 20 years. This is nothing new.
Unfortunately, the political will isn’t there to change matters, even if the potential outcome is a functioning tax system.
There are also many politicians who run their own companies and would be subject to higher taxes if the playing field changed. The hens don’t tend to vote to get their wings clipped.
Seb Maley, Qdos CEO, offered advice for employers preparing for IR35 changes:
Start preparing immediately. Form an IR35 strategy – a clear and timelined plan for managing the reform – and one that identifies exactly what’s needed to ensure accurate IR35 assessments, minimise disruption and safeguard your liability.
For example, consider case by case IR35 status reviews that are supported by IR35 insurance – this combination prioritises IR35 compliance and protects against the risks posed by the reform.