Updated: Nov 23, 2020
Why Government Inaction on IR35 is a Call to Action for Contractors
The Government announcing a one-year deferral of their IR35 reforms, during March this year, in the wake of the COVID-19 pandemic, will have given many contractors a welcome reprieve. However, along with the emphasis that the decision to delay represented a “postponement”, rather than a “cancellation”, subsequent events, actions and reactions have indicated just how deeply the Government is invested in these reforms. It seems the commitment to an April 2021 implementation to the private sector is stronger than ever, despite the ever-mounting concerns being raised about the viability of the new rules.
This attitude appears to have permeated Parliament, in general. Just last month, a vote on whether to further hold-off on implementation of the revised Off-Payroll Working rules to the private sector, failed to materialise. Proposed amendments to the Finance Bill 2019 - 2021, tabled by David Davis MP, sought to extend the current delay for an additional two years.
This move was made with a view to providing more time for the Government to address issues, which had been raised in a report by the Lords Economic Affairs Finance Bill Sub-Committee, only a few weeks earlier. Although, the amendment was just as likely tabled as an expression of sheer disappointment in the Government’s response to that same report.
Flawed, But Ignored
The problems identified by the Finance Bill Sub-Committee are manifold. A link to the relevant report can be found here:
Jesse Norman, financial secretary to The Treasury, on the same day the report was published (April 27, this year), would later inform the House of Commons that the Government “remain fully committed to introducing these reforms to ensure that people working like employees but through their own limited companies pay broadly the same tax as individuals who are employed directly”.
The timing and the tone of the response are perhaps the biggest signs yet of both the Government’s resolute position on the new rules and their continued immunity to any objective criticism of the reforms or IR35, generally. The reliance on what has become more of an advertising slogan than a well-reasoned principle, despite IR35 receiving what can only be described as a drubbing from The Lords, should be ringing loud alarm bells for all UK contractors. That Jesse Norman also assured us there would be more research conducted, by external parties, into the longer-term effects of the rules, will not offer much comfort.
This fallback lip-service and deflection tactic only serves to underline the lack of appetite there is for right action, right now. If indeed such research is pursued, the Government’s ability to fool itself into believing an abjectly unjust framework is fair, makes it difficult to imagine what value a researched forecast would return, at any rate.
Space, the Shrinking Frontier
Even though the anticipated May 19 vote had been touted by special interest publications for UK contractors and the self-employed, as being “crucial”, it just became one more example of non-action by Parliament. That it did not happen, due to Mr Davis’ tabled amendment not being selected by the House authorities, is one thing. The other, more important consideration, however, is that it would have almost certainly been soundly beaten, had the vote gone ahead, and this sends yet another message to despairing UK contractors.
With all of the above in mind, the appearance of MPs’ reluctance to get behind facilitating greater scrutiny of what is already an obvious blight in this government’s legislation, is admittedly a bit of head-scratcher. Whilst we like David Davis MP for his being the vanguard of the cause for the self-employed, the sparse presence of support behind him, must surely lead contractors to seek alternative means of redress.
On his twitter feed for May 19, updating his followers on the tabled amendment, Mr Davis ended by writing, “Watch this space.” At face-value, this open-ended salutation leaves only faint optimism that there are any options left for the lone MP to explore and nowhere near enough hope for those, who will suffer under the new rules, should they become an impractical reality in 2021. When what is actually required is a step change in approach to contractor status and taxation, precipitated by a radical shift in the Government’s viewpoint,
one has to wonder whether it is time to stop ‘watching space’ and for self-employed contractors to assemble; to devise market solutions to what will ultimately become a contract market challenge, for service providers and clients alike.
UK Contractor Zone welcomes any input from you, the readers, and will themselves continue to investigate, update and propose potential strategies to meet the challenge. Ten months – the approximate time left before implementation of the new rules within the private sector – might give the impression of there being ample time. There is not. We must plan for the worst - and we must start that planning, now.