The PM hopeful Liz Truss has promised to review the IR35 tax legislation once she becomes prime minster.
In an interview with the sun Truss had stated that theIR35 reform, established by the ex-chancellor and fellow prime mister candidate Rushi Sunak is “all about trying to treat the self-employed the same as big business”
The biggest criticism of the current rules for IR35 is that while contractors are taxed the same way as employees, they do not receive the same benefits like holiday pay and paid sick leave. In an interview with the sun Truss stated this is something that should be changed.
“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.”
In her interview with the Sun truss added:
“I’ve always been passionate about helping our country become more successful. I want people to have opportunities. Of course, I believe in hard work.
“I want our government to be on the side of people that work hard who set up their own businesses.”
The foreign secretary plans to make sure those who are self-employed are treated fairly. The recent government reforms to theIR35 tax legislation have faced disapproval from policy makers as they believe its too difficult to navigate.
Concerns from Contractors
Many Contractors have expressed their frustration with the promise of another review. In the 2019 Conservative manifesto, there was promise of a IR35 review however the party went along with their private sector changes in 2021.
CEO of Tax Compliance firm IR35 shield believes that IR35 is currently hindering flexibility at a time when the economy needs it the most. He stated “We don’t need another review, we need action. The so-called reforms are a flawed botch and have simply served to strangle contractors and those businesses which hire them.”
Andy Chamberlain, Director of Policy at The Association Of Independent professionals and self employed has come out to say that Liz Truss should just scrap IR35. “This review must lead to radical and tangible change. Nothing should be off the table, including scrapping this dreadful legislation altogether.”
A recent study by Simply Business found that more than 90% of contractors believed that the IR35 reform in 2021 should have been further delayed, with half agreeing that the it should be scrapped altogether.
To understand the impact that reforms have, a study was conducted by IPSE, who asked 400+ freelancers the experience they had with IR35 contracts. The study found that over 40% of freelancers had stated that “they had worked on contracts deemed outside IR35over the last 12 months, despite the imposition of IR35 reforms in April 2021”
20% reported company closure within the last 12 month sand 14% stating that they moved to permanent employment within the same time. Among those who had not moved to permanent employment, 18% are currently notworking. 72% claimed the reason for this was due to the introduction of IR35 reforms.
Similarly in a study conducted by insurerIR35 shield, 425 freelancers reported to have moved to permanent work due to IR35.
60% of these respondents stated that working inside of IR35 was not financially viable and 73% said they were worse off.
74% reported they would move back to contracting if they could secure an outside IR35 contract. 41% revealed that they were out of work for six months following the roll out of the tax legislation however this was during the pandemic therefore this may have not been the result of IR35 implementation.