Empowering the Freelance Economy

IR35: Truss must “fix it or ditch it” to boost economy, says compliance expert

Is Liz Truss' pledge to review IR35 review lead to action that will support the freelancer economy?
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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.” 

  1. Leslie Pearce-Burden says

    Any movement on this appalling situation is welcome, I have used the governments tool and it puts my company outside of ir35 but because all banks have dictated the workforce must be inside it there is no recourse, no recourse to employment law, holiday or sick, ok so I hear someone saying you can have deductions for those but that’s exactly what they are deductions from your own money, contractors are the first to go and with inflation on the rise what chance of any of us getting a pay rise we will be lucky to be renewed. Our costs have risen the agencies costs have risen it’s time to stop robbing the self employed

  2. John O'Neill says

    The bit that gets me about ir35, is that it is aimed squarely at contract workers, who work and get paid via invoices. What about all of these other businesses who deal ‘cash in hand’ like take aways, hairdressers, beauticians, dog groomers, builders and all those ruddy pop up car washes?!?! We are easy targets while that other lot are laughing at us and the HMRC all the way to the bank.

  3. David White says

    IR35 has reduced job opportunities. Stopped people from being able to transition into running their own company. Denied them the right to build up capital or pay off debt. It has no consideration for those like me who in 45 years have not had a full-time job but have run multiple contracts and employed teams of contractors. Why should we take risks when this government stacks so much against us? This is no small thing.

    They have created an environment where without an employment history it is almost impossible to get a job, as I have never had one! Meanwhile, the contracts have dried up. So many like me have retired and now they are a net taker from society, not willing to contribute.

    Like doctors, systematically taken out of employment when the country needs them. I am to blame. I was one of those who voted for the conservatives. The people who have taxed us to oblivion. Who continue to charge us the green levy while not attending to the basics like Power and Water, despite all the warnings that span years. The government single-handedly killed the over-80s in their droves. Who closed down the country and wasted billions. Who put all the small businesses that took covid recovery loans into debt? Who now find they have not recovered and the banks, who acted against all the best practices and who have been found out and reprimanded by the FCA, close those bank accounts and claim the debtors have defaulted and now through receivers up and down the country seek to have a second go at destroying the self-employed and label them as fraudsters whilst they are at. The self-employed – formerly the largest employer in the country. Now the government wonders why employment is so high.

    Who abandoned the promises made to the electorate about tax and who broke the pension lock for the elderly. While continuing with the vanity projects of the woke and the HS transport that will be ultimately governed by the unions. Who refused to access the benefits of brexit or undo the left-leaning quangos. Bojo, Rishi, Truss? What did you do?

    But it is not just the government and laws like IR35. It is the Inland Revenue that hates the self-employed specifically. They threaten the self-employed with the heavy hand of the law. They came to visit me with no evidence or grounds and advised if I did not stop my business they would launch an investigation and so I did I terminated the employment contracts and the offices. Taxable income stopped NI was no longer paid and this is how the online markets are ruled by American companies who also do not pay tax.

    Communism, and democracy, it is all idiotic doctrines, dogma, and rules placed on society by the meddling government that has only proven they are incapable of governing. Even recently putting Russians into the unelected house of lords whose only purpose is to slow down law making. A good thing I would say, considering.

  4. Neil g dupree says

    Well said Lesley

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