IPSE slams reforming IR35 amid a pandemic as ‘slightly perverse’

Introducing IR35 reform into the private sector at a time when the economy needs a flexible workforce to help it recover from coronavirus is “slightly perverse,” Derek Cribb, CEO of IPSE said yesterday.

Giving evidence to the Treasury Select Committee, Mr Cribb said the 2021 rules were already “disincentivising” contractors -- flexible workers that the government ought to “want to encourage…to help the UK economy out of the crisis.”  

The IPSE boss’s likely rationale was spelt out by another expert who was also giving oral evidence to the committee via videophone as part of its ‘Tax after Coronavirus’ enquiry, Andrew Titchener, head of tax policy at the CBI.

'Worst of all worlds'

“[Because] the tax risk is much more with the engager…what’s happening is that some employers are saying ‘well now we will just not engage with contractors’”, Mr Titchener said.

“And actually that seems, to me, to be the worst of all words because… it has increased the complexity and difficulty and costs for employers.

“But also at the same time, [it has] decreased some of the flexibility that the labour market has, as employers are reacting [to the incoming off-payroll rules] by saying we’re not going to take advantage of that flexibility because actually, it’s too costly and risky for us”.

'Government insists on IR35 reform'

As to why the government is forging ahead with the new IR35 framework, despite the fallout, the Association of Independent Professionals and the Self-Employed (IPSE) declined to speculate why.

Helpfully, Mel Stride MP, the committee’s chairman stepped in.

“Possibly one of the reasons why the government insists on it is to collect tax,” he braved, seeming to forget his role as an impartial chair. “Sorry”, he said,  “I shouldn’t [interfere]’.”  

'Fundamentally flawed'

But Mr Cribb suggested HMRC itself might need to interfere with the new IR35 legislation, because currently it is not fit for purpose, due to the wording around who is an intermediary.

“We’ve got a piece of legislation that is so clear that HMRC seem to lose more cases than they win and…is potentially fundamentally flawed and may need more primary legislation to make it viable to come in for 2021,” he said.

As to solutions, the IPSE boss says IR35 should go entirely. “I’m a great fan of that report [by the Lords Economic Affairs Committee which recommended axing IR35 altogether.] I’m just surprised it wasn’t listened to particularly by government.”