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New prime minister Liz Truss urged to press on with IR35 and loan charge policy reviews

Contracting stakeholders are contacting Liz Truss to create good on her behalf pledge to attempt overview of the IR35 rules when she became prime minister

Caroline Donnelly


Published: 06 Sep 2022 12: 30

UK prime minister Liz Truss has been reminded of her pre-election promise to examine the IR35 tax avoidance reforms and address what she previously called the poor handling of the governments controversial loan charge policy.

During Trusss Conservative leadership campaign, which culminated in her becoming prime minister today (6 September), she pledged to examine the IR35 tax avoidance rules, claiming they were forcing genuinely self-employed visitors to pay an excessive amount of tax.

The pledge was greeted with a good amount of scepticism by contracting market stakeholders, who said that previous reviews of the guidelines had done little to handle the issues and impacts due to IR35.

Now Truss is in power, a number of these same stakeholders are calling on her behalf to create good on her behalf pledge, while also restating their demands that her review must deliver meaningful change.

Included in this is Andy Chamberlain, director of policy at the Association of Independent Professionals and the Self-Employed (IPSE), who said his organisation is getting excited about dealing with Truss and her cabinet on her behalf promised overview of the IR35 rules.

Through the leadership race, Truss discussed tackling orthodox Treasury thinking, he said. If this review would be to deliver meaningful change which previous reviews havent she’ll should do exactly that: challenge the convinced that has resulted in this wretched legislation being enacted. If she makes real progress with this issue, she’ll achieve a thing that the prior three Conservative prime ministers couldnt enabling probably the most dynamic and innovative elements of the united kingdom economy to thrive.

The way the IR35 rules work in the general public and private sectors has undergone reforms recently, with the federal government introducing changes that meant contractors were no more allowed to choose for themselves how they must be taxed, in line with the work they do and how it really is performed.

Instead, responsibility to make those decisions has shifted onto the general public and private sector organisations that engage contractors, which are instructed by HM Revenue & Customs (HMRC) to utilize reasonable care when determining whether a contractors engagement should fall in or out of scope of the IR35 rules.

An inside-IR35 determination means contractors are believed to be employees for tax purposes, meaning they need to pay exactly the same tax as a permanent employee would. This implies they are prone to make pay-as-you-earn (PAYE) and national insurance contributions (NICs), whereas an outside-IR35 determination means the contractor is taxed being an off-payroll worker.

Among the major and recurring criticisms of the guidelines is that although inside-IR35 contractors are taxed exactly the same way as employees, they’re not eligible for have the same workplace benefits, such as for example paid sick leave or holiday.

Because of this, concerns have already been raised by MPs and campaign groups that is adding to a growth in the amount of zero-rights employees, while anecdotal accounts suggest the legislation in addition has contributed to a brain drain of IT contracting talent from the UK.

Seb Maley, CEO of contracting authority Qdos, said an intensive and fair overview of the IR35 rules would go quite a distance to helping Truss and the Conservative Party regain the support of the contracting community.

For much too long, freelancers, contractors and self-employed workers have already been overlooked by the federal government and hit with short-sighted tax reforms and hikes that threaten in this manner of working, said Maley.

But to seize this opportunity, the brand new prime minister must deliver on her behalf promises. This starts with IR35. Ms Truss has said she’ll review the IR35 rules, which are flawed and create big problems not only for contractors, also for the firms engaging them.

He added: An unbiased overview of IR35 that results in change should be prioritised that’s if the brand new prime minister genuinely really wants to unlock the entire potential of the flexible workforce.

Truss also reiterated her commitment to conducting overview of the IR35 rules throughout a meeting hosted by the Croydon branch of the Conservative Party on Thursday 18 August, when she was quizzed about lending support for another independent overview of the loan charge policy, which includes resulted in thousands of contractors receiving life-changing tax bills.

The loan charge policy, introduced in the 2017 Budget, is intended for recouping the tax that HMRC claims contractors avoided paying by opting to possess section of their salary paid in their mind by means of non-taxable loans when focusing on assignments between December 2010 and 5 April 2019.

Loan-based remuneration schemes are recognized to have proliferated in the wake of the IR35 reforms being introduced at the turn of the millennium, with setups commonly marketed through non-compliant umbrella companies being an HMRC-approved opportinity for contractors to bolster their take-home pay by artificially minimising their employment tax liabilities.

A large number of IT contractors who took part in these schemes in the nine-year period to 5 April 2019 have since been landed with six-figure tax bills from HMRC, reportedly leading to mass bankruptcies and adding to at the very least nine suicides.

In reaction to the obtain overview of the policy, Truss said: What sort of whole situation has been handled has been inadequate in my own view and well look at what we are able to do on that specific issue and well also ensure that, within our tax review, were considering IR35 and the impact which has had because again, individuals that are self-employed don’t get exactly the same benefits as those who are on pay-as-you-earn, so we ought to be doing what we are able to to help those individuals.

Steve Packham, spokesperson for the Loan Charge Action Group, welcomed Trusss acknowledgment of how difficult the policy has made life for all those in its scope.

She actually is to be appalled at the nine suicides and in addition quite correct that the handling of the complete issue by HMRC and the Treasury has been inadequate, he said. Its time for an effective independent overview of the whole lot and, most of all, for a good resolution to get rid of the nightmare for a large number of families.

We urge Conservative MPs to back the loan charge pledge also to ask the prime minister to examine and resolve the loan charge scandal before more lives are lost.

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