Scrap The IR35 Off Payroll Rules Say New Conservative Group

HMRC IR35 Own Goal of contractors
HMRC IR35 Own Goal of contractors

Scrap The IR35 Off Payroll Rules

A new Conservative backbench group has called on the Prime Minister and Chancellor to scrap the IR35 Off Payroll rules. According to Sir John Redwood the Conservative Growth Group (CGG) was ‘gathering strength’. It seems that it has now got enough members to overturn the Conservative Party majority in Parliament.

On the Sophy Ridge On Sunday show on Sky News he told Sophy that there should be sensible targeted tax cuts for the self employed. He said that dozens of Conservative MPs were signing up with the Conservative Growth Group.

It seems that they are going to make a joint representation to the Chancellor before the next budget urging him to scrap the IR35 Off Payroll rules amongst other requests.

Redwood said yesterday that he wanted tax cuts that would “boost self employment, boost investment and solve the problem of retaining doctors and other skilled staff and will add to the idea of growth.”

Reversal of Tax Rules Governing the Self Employed

He called for the reversal of a tightening of tax rules governing the self employed.

The Government and HMRC claim that the Off Payroll rules brings in £1.5bn to £2bn a year in extra taxes.

However, they haven’t worked out what the cost would be to the Treasury due to the fact that almost all of the UK’s top companies are now operating in a less efficient manner than when they decided for themselves what their optimum mix of contractors and permanent employees should be.

They have been terrorised into using fewer contractors for fear that they might fall foul of Government penalties if they guess wrong on which contractors are inside IR35 and which are outside.

Companies Now Decide IR35 Status of Contractors

It used to be the contractors themselves who decided their IR35 status and who were penalized if they got it wrong.

Now it is the employing companies who have to decide.

Many, including 4 of the 5 biggest banks operating in the UK have decided that using self employed contractors was too risky.

As a result those companies are now using an imperfect mix of contractors and employees.

They are no longer deciding what mix is best for their businesses. A new-sub-optimal mix has been forced on them by Government rules.

Liz Truss and Off Payroll Rules

Also one-in-five contractors have now got out of contracting mostly due to the new off payroll rules.

When Liz Truss was in power, she and her Chancellor said that they would scrap the IR35 Off Payroll rules.

She didn’t last too long and the proposal to scarp those Off Payroll rules was abandoned.

However, it seems that the idea is not dead in the Conservative Party and that this new growth group will have some teeth. Remember Jacob Rees Mogg and the ECG who caused havoc in the Conservative party over Brexit.

Conservative Growth Group and Off Payroll Rules

The Conservative Growth Growth will start by trying to get the Chancellor and Prime Minster to scrap the IR35 off payroll rules in the next budget.

They will have a hard job as neither Sunak or Hunt agree with them about the off payroll rules.

However, even Prime Ministers and Chancellors can get overruled as we have seen.

This battle is a long way from being over.

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