MPs have warned the UK government to pay close attention to the effect IR35 tax reforms will have on the private sector and questioned the efficacy of HMRC’s status-checking tool. Amid much controversy, the government rolled out changes to IR35 – or off-payroll working – rules in the public sector in 2017 and plans to do the same for the private sector in 2020. It shifts responsibility for determining tax status from the contractor to the business that hired them.
The aim is to close loopholes that allow people working through personal service companies to avoid tax contributions, which the government says will cost some £1.3bn by 2023-24. However, the regulations has been widely criticised for being confusing, hard to implement effectively and linked to people leaving contracting jobs in the public sector. And in a debate in Parliament late last week, MPs said the government didn’t appear to have learnt lessons ahead of the private sector rollout and had failed to incorporate them into an ongoing consultation. MPs warned that people were unlikely to go to HMRC for extra guidance, that poor application of the rules could damage contractors and the UK economy, and that it placed an extra burden on businesses recovering from the credit crunch and racing to prepare for Brexit.