• International Workplace
  • 27 March 2019

‘Myopic’ IR35 extension will ‘hamstring’ UK businesses, says IPSE

The government’s decision to push ahead with the extension of IR35 into the private sector will do serious harm to freelancers, the businesses that use them and the wider economy, IPSE – the association of Independent Professionals and the Self Employed – has warned.

IPSE commented after the government launched its consultation on the reforms on 5 March. It will be submitting evidence to the consultation warning about the dire risks of the changes to IR35.

The off-payroll working rules – commonly known as IR35 – are intended to ensure that individuals who work like employees pay broadly the same employment taxes as employees, regardless of the structure they work through.

The government announced at Budget 2018 that to increase compliance with the existing off-payroll working rules in the private sector, businesses will become responsible for assessing the employment status of the off-payroll workers they engage. This will bring the private sector in line with the public sector.

The government is seeking views on the how the off-payroll working rules will work from April 2020. The reform is being extended to all sectors and this consultation seeks to ensure the proposed processes are suitable for the large and diverse sectors in which the new rules will need to be operated, as well as engagers in the public sector already applying the rules.

The consultation asks for views and information on several subjects, including:

  • the scope of the reform and impact on non-corporate engagers;
  • information requirements for engagers, fee-payers and personal service companies; and
  • addressing status determination disagreements.

The consultation also sets out how businesses can prepare for reform, and sets out HMRC’s plans to provide education and support for businesses that will be in scope of the changes.

However, IPSE will be submitting evidence to the consultation warning about the dire risks of the changes to IR35.

Deputy Director of Policy, Andy Chamberlain, commented:

“This is an astonishingly myopic move. The UK’s greatest competitive advantage is its flexible labour market. This proposal will dramatically restrict that flexibility and starve UK businesses of the freelance talent they need to get work done.

“Pushing ahead with this during Brexit will hamstring freelancers and their clients when the country needs them most.

“HMRC has claimed pushing these changes into the public sector generated £550m, but this is at the cost of far-reaching long-term damage. In the NHS, TfL and right across the public sector, the changes led to mass contractor walkouts, causing disruption, staff shortages and even the cancellation of major projects.

“Brexit uncertainty has already driven freelancers’ confidence to an all-time low: the last thing they need now is heavy-handed legislation suffocating their sector.

“IPSE, the CBI and numerous other business bodies have already warned about the dire risks of the reforms – and we will do so again in this consultation. The government should finally open its ears to the experts and scrap the dangerous reforms to IR35 once and for all.”

The consultation is available to view here.