The Association of Independent Professionals and the Self-Employed (IPSE) has welcomed criticism of IR35 reforms in a recent report by the Public Accounts Committee. In the report, the Public Accounts Committee said that “widespread non-compliance” with the rules had led to government departments owing HMRC £263 million in unpaid tax.
While the report stated that it was “not acceptable” for the government to not be able to abide by or understand its own rules, much of the report’s criticism was focused on how HMRC had implemented IR35. The Public Accounts Committee said that HMRC has rushed the introduction of the rules, issued “poor guidance”, had not properly attempted to understand the “wider impact of the reforms on workers or labour markets” and had dismissed reports of adverse impacts on freelancers and businesses.
HMRC responded that IR35 reforms had “succeeded in making the tax system fairer”. However, the IPSE has backed up the Public Accounts Committee’s report and endorsed its verdict on the impacts of IR35 reforms and their implementation.
IPSE Director of Policy Andy Chamberlain said: “Today’s report is a damning indictment of the IR35 rules. It shows that the flawed reforms have had devastating consequences for hirers and self-employed workers alike, with thousands of self-employed workers losing public sector contracts since the changes to off-payroll work in 2017, while government departments have been left shouldering huge tax bills.”
“The report has also shown that too many hirers are making incorrect IR35 determinations. Employment status rules are notoriously complex for organisations to understand, and it is still far too difficult for workers to challenge incorrect determinations as there is no independent appeals process.”
Chamberlain added: “We at IPSE hope that the report jolts the government into action. It is clear the rules urgently need a rethink. The damage of the reforms to the public sector is just the tip of the iceberg – the much larger private sector is also really struggling with this. The rules are far too confusing, are causing major conflicts within the labour market, which is preventing projects from being done and, in turn, damaging the UK economy.”
