Lords ask for answers, claiming flaws are apparent in the proposed IR35 legislation.

A new report entitled Off-payroll working: treating people fairly, is seeking answers from the Government in relation to the proposed IR35 extension to the private sector.

The document, published by the Economic Affairs Committee of the House of Lords, has scrutinized the plans, claiming that similar legislation geared towards tackling tax avoidance has “never worked satisfactorily” despite continued attempts over the past 20 years. We can only presume, knowing the diversity in circumstance of the individuals set to be impacted, that their collective line of questioning is; “Why should this be any different?”.

Covid-19 caused a 12-month delay in the implementation of IR35 to the private sector, which was due to take place at the start of April 2020. The announcement of the delay has provided breathing room for accountants, employment agencies and contractors alike, but does it also mean that the government will embrace the time to once again review the proposal’s effectiveness and authenticity in its perceived goals? The House of Lords is certainly pushing for just that.

In its extensive report, the Economic Affairs Committee concluded that the new off-payroll working rules would simply add further layers to an already flawed system. They suggest that the introduction of the changes would cause widespread confusion and disruption, and that the cost to businesses has not been adequately calculated or analysed by the government. There are also fears that legitimate concerns raised by stakeholders, and the impact on the gig economy (among others), have largely been overlooked or underestimated.

Based on their finding, the House of Lords has suggested that the Government use the delay provided by Covid-19 to comprehensively review the IR35 model in attempt to address the “problems, unfairness and unintended consequences” that it may cause.

With the UK economy staring into uncharted territory due to the ongoing pandemic, would it really be responsible of the Government to add yet another layer of change and reform for businesses to contend with as they currently attempt to stay afloat?

Regardless, UK businesses will need clarity – the Economic Affairs Committee has suggested that an October 2020 announcement from the Government, detailing and justifying its plans may leave ample time for reaction. Right now, however, we remain in an uncertain climate. If the economic impact of Covid-19 should worsen or extend in duration – we ask, will there be calls for yet another delay on implementation of IR35 in the private sector? Or, pending a long hard look in the mirror, will the new rules be scrapped altogether? Only time will tell.