Contractor IR35 Reforms
Labour Business sent us this pres release on contractor IR35 reforms.
On Friday 6th December, Rebecca Long-Baily told Radio 5 Live that “Yes, we do have serious concerns about IR35, and it is something that’s come up in various business meetings that I’ve had with small businesses and self-employed people particularly, and it is something we are going to look at.”
Rachel Burden (Radio 5 Live): “So, just for absolutely clarity, under a Labour Government, this would not apply in the private sector from April 2020.”
Rebecca Long-Bailey (Labour): “Well, certainly we don’t think it will, no, but we need to have a system in place that is fair.”
Rachel Burden (Radio 5 Live): “That’s not absolute clarity…”
Rebecca Long-Bailey (Labour): “Well, it is, absolute clarity, but what we are saying is that we need to consult on a system that is fair for those businesses, but we don’t think IR35 is appropriate, so no.”
Response from Labour Business
Speaking as Labour Business’s spokesman on self-employment and freelancing, Philip Ross said that “we welcome Rebecca Long-Baily’s proposals to review the off-payroll regulations and potentially halt the April 2020 rollout.”
We produced a report on the regulations in September and they were discussed in detail at a fringe meeting with Bill Esterson the shadow small business minister along with other Off-Payroll experts, the fringe meeting itself supported the proposals offered.
History and recent contractor IR35 reforms
The report looked at the motivations behind IR35, its history and the recent implementation of the off-payroll regulations in the public sector. It draw on evidence from trade unions, the CBI, REC, IPSE and other business bodies.
As a conclusion the report called for significant reforms to the way that the self-employed are taxed and how it is governed and overseen and for the rollout of the off-payroll regulations to be halted. The report called for Labour to seize the initiative on self-employment and create modernised and effective way of managing them.
Labour the Home of Small Businesses
Philip Ross added: “We are pleased that Rebecca Long-Bailey and the team are seizing this opportunity to show that Labour is the home of small business and the self-employed.”
He added that :
“We pledge to work with the next Labour Government and Rebecca to help them deliver on their promise for a system that is fair for freelancers. We have a set of proposals that are ready to go and help kick off any consultation.”
“I look forward to working together with the expertise that we have in IPSE and the Stop-The-Off-Payroll-Campaign and the wider trade union movement and other business groups”.
General view from Labour Business
Labour Business recognises the value and contribution that freelancers and independent professionals make to our economy. We want some common-sense proposals which aren’t just about squeezing out taxes but are about making self-employment sustainable and prosperous so that it benefits those engaged in the model, the clients that use it, and our economy as a whole.
LabourBusiness – Report as an Agenda for Change
Philip Ross says that “we think Rebecca has made the right call. As this aligns with our report, which we will offer up as a draft agenda to get started on this important work”
The report concluded that:
- Implementation of IR35 was not as successful in the public sector as HMRC suggest
- The private sector is not ready for an April 2020 implementation
- Issues of liability for taxes are not clear, clients do not want the liability and neither do Agencies.
- Supply-lines of labour are far more complicated than envisaged by HMRC
- Changes to IR35 will impact more than tax, they will impact prosperity and flexibility in the economy
- Changes to IR35 suggest that some supplier roles cannot be done by an independent worker, but only by someone from a third-party consultancy
- HMRC needs to be more accountable and transparent
Issues with Contractor IR35 Reforms
The report recognised:
- the issues of compliance and the need to collect taxes from the self-employed
- that much of the problems are with freelancers using a limited company
- there is not enough case law around self-employment and it is certainly not keeping up with changes to the employment and business market
- that employment rights and tax status need to be aligned
We think that self-employment and the use of Limited Liability companies (also known as Personal Service Companies PSCs) needs to be considered on sectorial basis as well as across the whole economy. Self-employment and its use is segmented as studies have shown and policies on self-employment and IR35 need to reflect this too.
Fairer Way to Implement Contractor IR35 Reforms
Labour wants to find a fairer way to manage self-employed workers. We will be formally putting the following proposals to the new Labour Government:-
- Introduce a new business model for freelancers: Freelancers’ Limited Company (FLC) and amend guidance on IR35 to take into account its use
- Revise guidelines on key tenets of self-employment by industry sector; such as substitution, MOO and others.
- License use of a FLC by industry sectors allowing third parties like Trade Unions and Trade Association to be accrediting organisations
- Define a 4-year window for review of Freelancing policy and use of the FLC. Review effectiveness around the issues of tax revenue; flexibility and prosperity add employment rights. To be considered on sectorial basis.
- Make HMRC a Ministerial department and formally appoint a Minister for HMRC
- Suspend new IR35 roll-out to private and public sector, keep liability with the freelancer. Only move forward when considering results of Taylor review.
- Retain the IR35 forum, but with an independent chair
- Revise the CEST tool for establishing employment status by sector. CEST tool to use agreed precedents and cases and rules. To be agreed by the IR35 Forum as a governing body.
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