Controversial IR35 tax reforms must be re-examined after the coronavirus pandemic ends - Greg Wright

AMID the understandable concerns over the coronavirus pandemic, we must not lose sight of other burning business issues.

Dave Chaplin, Director of the Stop The Off-Payroll Tax campaign
Dave Chaplin, Director of the Stop The Off-Payroll Tax campaign

Here’s one significant announcement that could easily have slipped under the radar.

It’s been confirmed that controversial tax reforms affecting freelance workers have been postponed for 12 months due to the coronavirus outbreak.

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Chief Secretary to the Treasury Steve Barclay said the move to delay reforms to IR35 legislation was designed to help businesses and individuals, but stressed they had not been cancelled.

Legislation introduced in 2000, referred to as IR35, sought to prevent the exploitation of personal service companies for tax avoidance purposes.

Further changes were expected to be introduced from next month, which led to warnings this would prompt some freelance workers to retire early, find contracts abroad or look for other jobs.

Mr Barclay said: “This is a deferral, not a cancellation and the Government remains committed to reintroducing this policy to ensure people working like employees, but through their own limited company, pay broadly the same tax as those employed directly.”

The Stop The Off-Payroll Tax campaign, the contracting sector campaign group against the IR35 Off-Payroll Tax roll-out, has welcomed the news.

The decision was taken following pressure from campaigners and contractors who claimed that the inevitable loss of work due to the coronavirus pandemic for those contractors deemed inside IR35 and effectively forced into ‘zero rights employment’ would prove catastrophic.

Dave Chaplin, Director of the Stop The Off-Payroll Tax campaign and CEO of ContractorCalculator said: “We warmly welcome the announcement that the Government has seen sense and delayed the damaging IR35 Off-Payroll Tax roll-out for a year.

“With contractors and freelancers facing losing work with no sick pay, it was clearly the right and sensible thing to do.

“We would like to thank our 2,600 campaigners for their excellent and tenacious work and we thank all the MPs who raised their concerns with the Treasury and opposed the flawed policy.”

But Mr Chaplin believes the campaign is far from over.

He added: “We must now keep pushing for changes to outlaw the disgrace of ‘zero rights employment’ and to make it illegal for firms to push employer’s taxation onto contractors.

“We must also push for the genuine review of IR35 legislation promised by the previous Chancellor, as part of the Conservatives planned review into self-employment.

“Over the next year, it’s time to finally overhaul the discredited IR35 legislation, which everyone knows doesn’t work and instead come up with a way to properly recognise contracting and freelancing in the tax system and ensure people are either classed as self-employed or are employees with full rights and benefits.”

Andy Chamberlain, Director of Policy at IPSE (the Association of Independent Professionals and the Self-Employed), also praised the Government’s action.

“The government has done the sensible thing by delaying the changes to IR35 in the private sector. These changes have already undermined the incomes of many self-employed businesses across the UK. However, they would have done even more serious damage if they had gone ahead as planned.

“It is right and responsible to delay the changes to IR35 for at least a year during the coronavirus crisis, to reduce the strain and income loss for self-employed businesses.”

During a time of uncertainty, the Government has made the right call over IR35.

Many contractors and freelance workers are very worried about the future. Taking these reforms off the table, for the time being at least, will give them much needed breathing space. It will also mean the Government can focus more of its energies on supporting firms that are fighting for survival. But this should be more than simply a deferral. The Government should use the extra time to consult widely on the changes to IR35. They must be examined again after the pandemic passes.