Government review of IR35 slammed as ‘recklessly inadequate’, despite ‘light touch’ pledge

A UK Government review of new tax rules that will affect thousands of North Sea contractors has been slammed as “recklessly inadequate”.

Tweaks to the “catastrophic policy” go “nowhere near far enough”, said Andy Chamberlain, deputy director of policy at the Association of Independent Professionals and the Self-Employed (IPSE).

Last month, the government launch a review into the changes to off-payroll working rules to “address concerns” from individuals and businesses.

The rules, known as IR35, were first implemented in 2000 to make sure individuals registered as freelancers, but who are effectively employees of a company, are paying the right level of tax.

To improve compliance, the government in 2017 made public sector organisations responsible for determining employment status.

From April 6, 2020, that reform will be extended to every medium and large private sector business in the UK.

West Aberdeenshire and Kincardine MP Andrew Bowie previously warned that some north-east oil and gas workers’ income would be reduce by as much as 25%.

Last week, Aberdeen South SNP member Stephen Flynn agreed oil workers would be hit hard and called for a U-turn on the reforms.

Publishing its review today, the Treasury said it valued the vital role that the self-employed have in the UK labour market, but confirmed the reform would go ahead in April, albeit with some amendments.

The Treasury said the taxman would take a “light touch” at first. Businesses will not have to pay penalties for inaccuracies in the first year, except in cases of “deliberate non-compliance”.

Furthermore HM Revenue and Customs will ramp up its communications efforts, including webinars and guides, to support contractors’ understanding of the rules.

Financial Secretary to the Treasury Jesse Norman said: “It is only right that the off-payroll rules are applied consistently across all sectors. Two people sitting side by side doing the same work for the same employer should be taxed in the same way.

“Following a review the government is announcing a package of measures to help individuals and businesses implement these changes smoothly.”

But Mr Chamberlain complained that the review was “rushed out the door in less than two months”.

He added: “These off-payroll rules will be catastrophic for the contracting sector and will do serious damage to client businesses and the wider economy.

“Many businesses are already scrapping their contractor workforce because of these changes and, as we told the House of Lords inquiry, our research shows at least a third of freelancers plan to stop contracting in the UK because of them.

“We continue to urge the government to rethink this disastrous policy before it is too late.”

Seb Maley, chief executive of IR35 specialist Qdos, said the government had paid “lip service” to the issue with its review, labelling the outcome “very disappointing, albeit unsurprising”.

Mr Maley added: “While applying a ‘light touch’ to reform for the first 12 months has been welcomed, this is a red herring.

“It only applies to ‘penalties’, not necessarily tax liability owed as a result of inaccurate IR35 determinations. Therefore, private sector companies should not pay too much attention to this.”

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