Conservative leader and Prime Minister candidate Liz Truss has pledged, if voted into power, to review IR35, the tax legislation that many serving and working in the freelance economy see as an “iron shackle” on their employment and revenue-generating powers.
Truss has gone as far as to put IR35 on her agenda, promising a review of the legislation and its impact on self-employed workers if she becomes Prime Minister.
In an interview with The Sun on Sunday, Truss was quoted as saying:
The changes that have been made to IR35 are all about trying to treat the self-employed the same as big business. But the fact is, if you’re self-employed, you don’t get the same benefits as being in a big company. You don’t get paid holidays, you didn’t get those benefits. So the tax system should reflect that more.Liz Truss
Less IR35 review, more action
The UK inflation rate is set to peak at a near 50-year-high of 18.6 per cent early next year with energy prices set to soar, investment bank Citi has warned. Citi also says the Bank of England might have to hike interest rates to as much as 7 per cent to get spiralling prices under control. Now is not the time to stifle any facet of the UK workforce, especially those that fend for themselves through self-employment.
Dave Chaplin, CEO of tax compliance firm IR35 Shield, welcomes the news, but is quick to opine on what Truss must and must not do when it comes to this controversial bugbear that has negatively impacted hundreds of thousands of independent workers.
“Whilst it is good to hear that Liz Truss intends to focus on IR35 as part of her vow to help small businesses should she become our next Prime Minister, my message to her is loud and clear: we don’t need another review, we need action,” says Chaplin.
The so-called reforms are a flawed botch and have simply served to strangle contractors and those businesses which hire them. IR35 is an iron shackle, impeding flexible workers who can help deliver growth just when the UK economy and UK plc need them. The time to act is now.Dave Chaplin, CEO of tax compliance firm IR35 Shield
He continues: “Over the last 20+ years, there has been considerable misjudged and damaging legislation heaped on the contracting sector and the sensible option would be to go back to the drawing board and design a fair tax system that works fairly for everybody – let’s fix it or ditch it.”
Seb Maley, CEO of IR35 insurance specialist, Qdos, is also cautiously welcoming Liz Truss’s promise to review IR35 if she becomes Prime Minister.
“Promising a review into IR35 is a step in the right direction,” says Maley. “It’s widely accepted that the IR35 legislation and the way HMRC enforces it is fundamentally flawed. Liz Truss must make a review a priority if she becomes Prime Minister. But this mustn’t be lip service,” he says.
Maley and others are hoping history does not repeat itself.
“It’s impossible to overlook the fact that we’ve been here before. IR35 has been reviewed multiple times in recent years, yet still the government have taken very little or no action whatsoever. So you’d forgive contractors and businesses impacted by the rules for taking Liz Truss’s pledge with a pinch of salt,” he says.
Maley stresses that any review of IR35 needs to be “independent and far-reaching”.
“HMRC’s very own IR35 status tool is unreliable and inaccurate, which is a major risk to compliance,” he says.
“While the legislation is forcing genuinely self-employed contractors into zero rights employment – a situation where they pay tax as employees but don’t receive any employment rights in exchange. Having specialised in this legislation since its introduction in 2000, Qdos stands ready to contribute to any review.”