IR35 Under Fire at Autumn Statement: Calls for Reform Grow Louder

IR35: A Thorn in the Side IR35, also known as the "off-payroll rules," has been a point of contention since its inception. The rules were first introduced in 2000, with significant revisions made in 2017 for the public sector and further extended to the private sector in 2021. IR35 is designed to ensure that individuals working like employees through their own companies pay income tax and National Insurance contributions (NICs) similar to directly employed individuals. 

 

Accountancy Boss's Plea Teodora Dimitrova, owner of Chart Accountancy, recently made headlines by calling for IR35 to be addressed during the upcoming Autumn Statement. She even wrote to two MPs, urging them to seek the removal of the rules. Dimitrova pointed out that large international companies have stopped hiring UK-based consultants due to IR35, affecting the ability of contractors to secure contracts. 

 

Tory MPs Weigh In Prominent Tory MPs, Sir John Redwood and David Davis, have voiced their concerns about IR35. Sir John Redwood sent his "wish-list" to Chancellor Jeremy Hunt, highlighting the loss of 800,000 self-employed individuals in the UK since February 2020 and its connection to the 2017 and 2021 changes to IR35 taxation. He called for the restoration of the pre-2017 tax regime, eliminating the off-payroll framework. 

 

David Davis, the former Brexit secretary, also expressed his desire to see IR35 reform repealed. He emphasized the need for a well-considered tax cut to encourage enterprise and stimulate the economy. 

 

Mixed Reactions Contractor accountants like Teodora Dimitrova and Anthony Mellor welcome the idea of scrapping IR35, as they believe it will promote entrepreneurship. However, Seb Maley, CEO of Qdos, is more skeptical about the likelihood of IR35 reform being addressed in the Autumn Statement, based on the absence of mentions in key political speeches. 

 

Non-Legislative Solutions While a complete repeal of IR35 may be unlikely, many are advocating for administrative improvements to the existing rules. One such improvement is overhauling the Check Employment Status for Tax (CEST) tool. Others emphasize the importance of cracking down on blanket bans and ensuring fair and well-informed IR35 determinations by businesses. 

 

A Call for Clarity The controversy surrounding IR35 persists, with critics asserting that the rules are stifling the contracting market and forcing some contractors into permanent employment due to a lack of transparency. As the Autumn Statement approaches, the demand for change grows stronger. 

 

Conclusion The debate over IR35 continues to escalate, with contractors, MPs, and business leaders calling for its reform or removal. While the outcome of the Autumn Statement remains uncertain, it is evident that IR35's impact on the UK workforce is a matter of concern. Whether or not IR35 will see changes in the near future, the dialogue on its effects and potential improvements will persist.