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IR35 backlash continues as Spring Budget nears

As the Spring Budget approaches, Qdos CEO Seb Maley said the government has an opportunity to reform IR35

Half (49%) of contractors said IR35 is the main reason for poor business performance in 2023, according to flexible worker insurer Qdos.

IR35 makes businesses responsible for determining if a contractor provides their services as a self-employed worker or as an employee. 

If a contractor is engaged ‘outside' IR35, they pay taxes as self-employed individuals. If they are deemed ‘inside' IR35 they are taxed as an employee, meaning they can pay up to 30% more in tax. However, workers outside IR35 do not receive employment rights.

Read more: Gary Lineker wins appeal against £4.9 million IR35 bill

In a survey of 900 independent workers, half (49%) wanted the government to scrap IR35.  

The number of contractors who want to see the government address the off-payroll working rules (68%) is more than treble the number who want the recent increase to corporation tax reversed (19%). 

Politicians have also called for change.

In December, Tory grandee David Davis called on chancellor Jeremy Hunt to abolish IR35. He referred to the case of TV presenter Kaye Adams, who was forced to spend £200,000 in legal fees over nine years after HRMC took her to court four times, despite her winning her first tribunal.

As the Spring Budget approaches on 6 March, Qdos CEO Seb Maley said the government has an opportunity to reform the rules.

He told HR magazine: “Every year, the complex and confusing IR35 legislation stands out as the one freelancers and contractors want addressed most by Westminster. But time and time again, the powers that be choose to bury their heads in the sand. 

“With the Spring Budget rapidly approaching, if repealing the legislation is out of the question, at the very least the government must resolve the major issues relating to IR35 and the off-payroll working rules.

“From completely overhauling HMRC’s flawed IR35 tool, CEST, to helping ensure businesses carry out well-informed and compliant IR35 decisions, there’s a lot of work to be done on the IR35 front this year.”

Read more: Government opens IR35 consultation

However, Matt Jenkin, employment law partner at Herrington Carmichael, said there have not been any plans for IR35 reform announced.

He told HR magazine: “Those expecting any fundamental change to the off-payroll working rules are likely to be disappointed by the Spring Budget as there is little to suggest that the government is considering any changes to the current regime. 

“I am sure that many would welcome an update to the CEST online assessment tool so that more accurate status determinations can be made. However, even subtle changes such as this don’t appear to be on the horizon.

"Looking beyond the budget and having one eye on a forthcoming election, it is unlikely that even a change in government would see a change, with reform of IR35 not really featuring as part of Labour’s current plan for employment law reform.”