UK MPs to off-payroll workers: Delay IR35 reforms until 2023? You wish
- Reference: 1589977811
- News link: https://www.theregister.co.uk/2020/05/20/mps_ignore_calls_to_delay/
- Source link:
MPs were due to vote on the amendment yesterday afternoon, but enough of them declined that the postponement had no chance of attaining a House majority, so the Commons skipped the vote altogether.
The reforms are set to make medium and large-sized businesses responsible for determining the employment status of contractors, rather than the contractors themselves. Many UK-based companies have put in place blanket-ban policies for techies who are employed via their own personal service companies (PSCs).
The IR35 rules are designed to make contractors who work with directly employed staff pay similar income tax and national insurance contributions – but without the same holiday and sick pay benefits. Affected techie contractors have argued they also risk scaring firms away from hiring freelancers for fear of the complexities involved. Yet others complain they're being pushed into umbrella companies and PAYE situations, with an " [1]effective pay cut of up to 30 per cent ". These issues have led to considerable frustration in the community.
Auf wiedersehen, pet: UK Deutsche Bank contractors plan to leave rather than take 25% pay cut for IR35 – report [2]READ MORE
MPs did not vote on an amendment to delay introducing the changes until April 2023, despite the April publication of a [3]House of Lords report which called for a complete rethink of the proposed legislation .
At the time, Lord Forsyth of Drumlean, chair of the House of Lords Economic Affairs Finance Bill Sub-Committee, [4]said : "Our inquiry found these rules to be riddled with problems, unfairnesses, and unintended consequences."
In Parliament yesterday, David Davis, Conservative MP for Haltemprice and Howden, who proposed the amendment, urged the government to implement the [5]Taylor review [PDF] proposals to the tax system, which the Lords report recommended.
"Treasury has neither the time nor the capacity for a wholesale review. Therefore, the only sensible course of action is to pause these reforms and take the time to properly review the impact they'll have on the self-employed."
Davis said the review would give the government the chance to "consider tax, rights and risks together, as they should be".
Since the government announced the reforms to the legislation, which were set to be introduced this year before they were [6]delayed , many corporations have effectively banned use of PSCs instead of risking being financially liable for a tax bill should their contractors be deemed in scope of IR35. [7]Big banks such as Barclays, Lloyds, RBS, Deutsche Bank, and HSBC, as well as pharma giant GSK and defence titan BAE Systems have taken such decisions .
Other businesses have slipped back into the old ways, using contractors via PSCs. This includes Fujitsu, Deutsche Bank, Capgemini, National Grid, Asda, Bupa, Tesco and Jaguar Land Rover.
Jesse Norman MP, financial secretary to the Treasury, told MPs the government would not consider delaying implementation of IR35 reforms. "A delay would have very significant drawbacks. It would not address the intrinsic unfairness of taxing two people differently for the same work, it would extend the disparity between the private and the public sectors, and it would come with a significant fiscal cost, which other taxpayers up and down the country would have to make up," he said.
Seb Maley, CEO of IR35 tax advisory firm Qdos, said he was not surprised the government had refused to listen to calls for a delay. "It has buried its head in the sand when it comes to IR35, continually ignoring compelling arguments that call for a rethink of the legislation. The coronavirus crisis also means raising tax receipts has become a priority for the Treasury - even if that means contractors may be wrongly forced into 'zero-rights employment' as a result of the reforms."
The Finance Bill, which contains the reforms to IR35, now moves to the committee stage within Parliament. ®
[1] https://www.theregister.co.uk/2020/02/18/contractors_plan_to_leave_deutsche_bank_ahead_of_ir35_rollout/
[2] https://www.theregister.co.uk/2020/02/18/contractors_plan_to_leave_deutsche_bank_ahead_of_ir35_rollout/
[3] https://www.theregister.co.uk/2020/04/27/lords_ir35_report/
[4] https://www.parliament.uk/business/committees/committees-a-z/lords-select/economic-affairs-finance-bill-sub-committee/news-parliament-2019/call-for-evidence2019/
[5] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/627671/good-work-taylor-review-modern-working-practices-rg.pdf
[6] https://www.theregister.co.uk/2020/03/17/uk_ir35_tax_reform_postponed/
[7] https://www.theregister.co.uk/2020/02/27/ir35_to_go_ahead_says_government_review/
"Therefore, the only sensible course of action is to pause these reforms and take the time to properly review the impact they'll have on the self-employed."
I was under the impression that IR35 doesn't affect the self-employed. It only affects company directors and their employees, who are often the same person. But they aren't self-employed, that's the entire point.
One of the main reasons for using a limited company is literally to limit your exposure to legal issues. For example, if your agency messes up, doesn't get paid by the client and decides to sue you for the money, you simply declare your company bankrupt and open a new one. If you're self employed, you just sell your house and car, declare bankruptcy and go live under a bridge.
No, this didn't happen to me, but someone I know.
On many forms you are considered self employed as a Ltd Company contractor. Although under IR35 ltd company contractors are employees of the client, for tax purposes anyway. For employment law purposes they are still ltd company directors and for tax purposes where tax is going the other way they are also classes as company directors. So basically they are only employees when HMRC want money off them. Which is one of the main arguments against IR35...
Yet again El Reg....
"The IR35 rules are designed to make contractors who work with directly employed staff pay similar income tax and national insurance contributions"
No, IR35 is to catch disguised employees. Who I sit next to is irrelevant, as is what I do compared to others. What *IS* relevant is:
- if I have a boss telling me how and where to do (location, working hours, uniform etc)
- the company treats me like an employee (holiday pay, training etc)
- if they keep paying me even when there's nothing to do / move me to another role while its quiet.
anon PSC / el Reg IR35 article police (it seems, again!)
Given that this is about "disguised" employees - there is obviously an element of people / companies trying to avoid matching such criteria. I personally would favor a more practical mechanism which would make a decision based on probabilities rather than a few black and white statements. For example if the majority of the following apply, you are likely (but not guaranteed) to be a disguised employee
- You are required to use a company PC - and not permitted to use your own devices.
- You are added to the company directory and required to use company email address
- You are required to attend regular company meetings that are not directly related to your work.
- You contract does not specify what you need to deliver just a fixed time period.
- You need to provide regular time sheets to get paid- not a report of deliverables completed.
- Your fees have no direct relationship to the quality of work - i.e. you are on a fixed rate with no quality review capability to adjust these fees.
- You are required to comply with the company ways of working and policies - for example travel class restrictions or traveling with specific companies
- You do not need to provide guarantees on the work you have completed which can be invoked after you leave - i.e. similar to sale of goods legislation.
There is an ever simpler method: Equalise total tax on dividends and salary. However, this isn't going to happen because:
a) It would show that they are already pretty much equal (taking into account corporation tax and national insurance), and at higher rate dividends are taxed more than salary
b) It would show that, contrary to what HMRC & UK.gov have been claiming all this time, even "fake" contractors (disguised employees) are not avoiding tax but their clients/"disguised employers" are (in employer's NI)
c) It would not be as helpful to the government's large backers, like Capita and other body shops, who stand to make a killing out of these reforms (and export all that profit out of the UK, of course).
That's not reality...
Whilst poor wording from El Reg, your definition of what it is supposed to be is equally incorrect in reality - one could wish it were so simple. More accurate would be: HMRC - are you a contractor? Yes; well you're inside IR35. Cue extended fight, and if you can afford to take it all the way to court you'll probably win and be outside (but HMRC will still not believe it).
"The reforms are set to make medium and large-sized businesses responsible for determining the employment status of contractors, rather than the contractors themselves."
I am constantly surprised that el'Reg, a techie publication with a large contractor readership, keeps making mistakes like this.
IR35 has nothing to do with employment status, and therefore the reforms have no effect on who has responsibility for determining the employment status of contractors.
What it does is move the responsibility to determine employment status *for tax purposes*. While this sounds similar, it is a very different thing. If it was about determining their employment status, one found inside IR35 would become, effectively, an employee of the company, with all the rights and benefits that entails. Instead, this basically just nullifies the existence of the contractor's company and taxes the entire fee that the company is being paid as if it were the salary of the contractor. It is for tax purposes only, not employment purposes, and ensures that an inside-IR35 contractor pays more tax than an equivalent employee while receiving none of their benefits (from the "deemed employer" or the government).
A right pig's breakfast
Slop all around and nobody wants to mop it up.
Somebody remind me why we have government already ?
Enough had declined
So they didn’t vote.
Do we still get to know who declined?