Surely the government is out of excuses on IR35, umbrellas and ignoring the Lords

A 14-page letter to a Treasury minister from the chair of a Lords committee is supportive of a lot of the criticism that has already been levelled at the government where the off-payroll framework is concerned, writes former Treasury secondee Rebecca Seeley Harris, of IR35 advisory ReLegal Consulting . 

Not just an issue of tax

It is particularly refreshing to see the chair, Lord Bridges of Headley, say that the fairness of the measures introduced on April 6th 2021 should not be restricted to tax in isolation -- but instead must also apply to employment rights. 

With this in mind, the House of Lords Economic Affairs Finance Bill Sub-Committee has officially recommended to the government that it takes forward the measures tabled by the Taylor Review. Again – because they issued that recommendation in 2020, too.

Another issue which is now highlighted by the Lords, and is of concern to me as a practitioner, is how practically difficult it is for businesses to navigate the maze of employment status and make an assessment that will not fall foul of HMRC at some later date. 

The rules we have right now are not clear

This concern was expressed by various expert witnesses to this Lords’ off-payroll follow-up inquiry, and these witnesses said, to quote just one of them (IPSE’s Andy Chamberlain), that “the rules we have right now are not clear.” That is indeed the root cause of the problem. 

It doesn’t take a forensic reader of Lord Bridges’ letter to the Treasury to hear how disappointed the peers are that nearly two years on from their earlier report, “no significant progress” had been made. 

This same point of complete inaction from the government is one I made on BBC Radio 4’s Money Box last month, in relation to Smith v. Pimlico Plumbers. That’s a case that has taken 11 years for plumber Gary Smith to get justice and significantly, the government has made no helpful in-roads in that entire period to clarify employment status.

Very regrettable, but also very much warned about

But there is also concern (rightly raised and recognised by the sub-committee) that the off-payroll rules have resulted in more people being pushed into umbrella companies. This is very regrettable considering umbrella company working is a totally unregulated sector. But this is not news to the government – officials, departments and ministers have been warned about this repeatedly, not least by Off-payroll.org founder and inniAccounts CEO James Poyser and myself, as part of our ‘Fair Umbrella’ campaign. 

Unfortunately, there is nothing new in Lord Bridges’ letter and although the covid-19 pandemic has been a valid excuse for HMT, HMRC and BEIS all not making progress, the government is now running out of excuses.

I have said many times before and I will say it again now in the hope that this is the final time. There have been many reviews into employment status, including the very comprehensive Employment Status Review carried out by the Office of Tax Simplification in 2015, which made many sensible and worthwhile recommendations but which like the Taylor Review, are still yet to be implemented. Surely, with Brexit and covid no longer snapping at its heels, the government's reasons for not implementing these recommendations – recommendations largley backed by the Lords -- have run out.