Veteran Conservative MP IR35 tenacity ‘welcomed’ by industry

Several contractor leaders have welcomed senior conservative MP Sir John Redwood’s tenacity in calling for the IR35 legislation to be reversed in the chancellor’s November budget.

As November’s Autumn Budget approaches, Redwood has published a budget blueprint which included calls to reverse the off-payroll working rules.

Dave Chaplin, CEO of contracting authority ContractorCalculator argues that the current legislation “unfairly” targets the self-employed and flexible workforce, and hampers UK productivity.

However, he admits a full repeal is unlikely but hopes to hear more details from chancellor Jeremy Hunt regarding the fixes to the major structural defect of double taxation.

“This flaw has seen contractors and firms paying taxes on the same income, effectively leading to marginal tax rates over 100% – this is the antithesis of Conservative values,” he says.

Seb Maley, CEO of Qdos Contractor, echoes this point and says there is no shortage of Conservative MP’s who take issue with IR35 itself and the off–payroll working rules.

“Given this legislation impacts many traditionally Conservative voters, the reform hasn’t been popular,” he adds.

Will IR35 be included in the Autumn Statement?  

Conservative veteran Redwood’s Autumn Statement plan, backed by several of his peers, is designed to combat inflation and alleviate fiscal pressures by reducing government spending.

He wants Jeremy Hunt to introduce affordable tax reduction including the removal of IR35.

It is, however, improbable that the off-payroll rules will be reversed by the Chancellor next month, says Maley. Instead, he argues the government look to fix problems with the legislation, such as preventing blanket IR35 determinations to overhauling CEST (Check Employment Status for Tax).

“The reality is the government needs to rethink how independent workers are taxed. The tax burden is at a 70-year high, which is stifling self-employment and entrepreneurialism at a time when the economy needs these workers more than ever,” Maley states.

IR35 double taxation issue

In September, there were reports HMRC intended to address the issue of double taxation associated with the legislation, a step which garnered support from many.

Maley says the problem has not been completely rectified despite HMRC providing businesses under scrutiny for off-payroll matters the opportunity to prevent potential double taxation by agreeing to a settlement.

“We’re still awaiting the response to a government consultation, which seems ridiculous given how illogical this flaw in the legislation is,” he says.

The problem is expected to be addressed in the next Finance Bill, according to Chaplin; HMRC have been aware of the issue since 2018.

There are also two additional concerns that Chaplin believes warrant HMRC’s attention; these were included in the ‘fix or ditch’ campaign by ContractorCalculator in March.

“The government can quickly fix these issues with minor amendments to the existing legislation.” The reforms erode trust in the Conservative Party and hinder UK growth,” says Chaplin.

“Targeted legislative fixes are imperative to undo the damage to the self-employed and revitalise the flexible workforce.”