IR35 finance concept. United Kingdom tax law tax avoidance

Here at Gorilla accounting, we’re always up to date with the latest financial news and legislation, including the infamous IR35, which is now under fire by the House of Lords.

The House of Lords have been very critical of the IR35 reform that was, initially, to be implemented this year and which was delayed until 2021.

They have called on the government to rethink the extension and to consider an overhaul instead. Not only is the reform set to cause issues for contractors in the private sector but, with everything that is currently happening in the world, it also doesn’t feel like the right moment to implement such strict rules.

According to Dave Chaplin, on an article on The Recruiter: “The UK economy will need the help of the UK’s flexible workforce to get back on its feet… and that is going to take some time. Now is not the time to apply a straitjacket.”

The Lords’ Economic Affairs Finance Bill sub-committee believe the reform is too strict when it comes to the way it views taxation and that it doesn’t consider the impact on the labour market. They also said that the rules are ‘inherently flawed and unfair’, with some contractors already being fired even though the reform is postponed until next year.

Some are now ‘zero-rights employees’ as well, since they don’t have the tax benefits of being self-employed and neither do they have the rights that come with permanent employment.

Despite all this, and the Lords’ call, the government plans to continue ahead with the IR35 changes in the next tax year. This means that, after April 2021, the measures will come into effect no matter what.

Businesses are unlikely to be prepared and recovered once the pandemic – and the lockdown measures – are no longer an issue. So, both contractors and their Clients are probably not going to be ready for the reform once April 2021 rolls around, which can be worsened by the fact that Brexit has to be taken into account as well.

Although the Treasury reminds that two individuals that are doing the same work for the same employers should have pay the same tax and national insurance contributions, there are many who think IR35 is not the answer to ensure this.

The House of Lords appear to agree. They have said, in their report, that “the government should reassess the flawed IR35 framework and give serious consideration to the fairer alternatives to the off-payroll working rules which we lay out in this report.”

Gorilla Accounting understand that the IR35 issue, as well as its many reforms and changes, can be incredibly complex and many contractors may feel lost and unsure of how to proceed. As contractor accountants, we can help you to understand this legislation in-depth and will work with you to provide guidance and support around the rules.

If you want to learn more about the House of Lords’ call or the government’s decision, or if you’d like to discuss our many accounting services, don’t hesitate to get in touch with our professional team today on 0330 024 0406.