House of Lords launch IR35 inquiry alongside Government review

A House of Lords committee has launched an inquiry in to the extension of IR35 to the private sector, which comes a month after the Government announced its review of the legislation.

The Finance Bill Sub-Committee which was announced on the 04/2/20, has a specific focus on the extension of off-payroll working rules, and invites contributions to its inquiry before the 25th February.

The inquiry will look in to how the rules impacted the public sector since being implemented in 2000. Whether or not the impact of the legislation has been properly assessed, what HM Revenue & Customs (HMRC) should do to help businesses understand these new rules and the HMRC’s Check Employment Status for Tax (CEST) tool and how it can be made more effective at its job.

Lord  Forsyth of Drumlean, chair of the Lords Finance Bill Sub-Committee and former Conservative cabinet minister, said:

We are interested in how this change will work in practice, and how it relates to wider changes in working arrangements.

To inform our work we want to hear from as broad a range of people and organisations as possible. If you have a view on off-payroll working rules, please let us know what you think.

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

While we welcome this inquiry in to IR35 reform, we can’t help but wonder why it wasn’t held months ago. Nonetheless, it’s an opportunity for contractors, agencies, businesses and experts to have their voices heard.

It’s vital that the Lords Select Committee looks at the facts around IR35 changes. Has public sector reform worked? No, not when you consider that thousands of contractors were unfairly forced inside IR35. Is HMRC’s IR35 tool capable? In its current state, it simply isn’t fit for purpose. What effect might further IR35 reform have on contractors? If mismanaged, there is a risk the private sector will repeat the mistakes made in the public sector.

Regardless of this inquiry and the ongoing IR35 review, recruiters and end-clients must continue preparing for reform, which will be introduced on 6th April.

Dave Chaplin, director of StopTheOff-PayrollTax campaign, which campaigns against the roll out of the “off-payroll rules” said:

We are delighted that the Lords are paying attention to the problems are being caused by this ill-thought out legislation. The proposals have opened the door for a new status of ‘no-rights employment’ which must be urgently addressed. Also, we are seeing large swathes of contractors being terminated by clients who are delaying and cancelling projects because they do not wish to take the risk of getting it wrong.

The Treasury and HMRC have consistently claimed that the so-called reforms will not affect the genuinely self-employed. The evidence is now clearly to the contrary, and Government must act now by ensuring firms can continue to hire contractors without undue risk.

Already, all “big four banks” has placed a ban on the use of contractors in the run up to IR35. The Royal Bank of Scotland (RBS), HSBC, Lloyds and Barclays have all put a stop to the use of contractors.