Since April 6 2017 public sector bodies and agencies have been responsible for operating the tax rules that apply to off-payroll working in the public sector, often referred to as IR35. The government stated before introducing this change that it believed there was evidence of widespread non-compliance with the legislation. In the 2017 Autumn Budget, the government stated that due to its reforms, compliance with IR35 in the public sector was increasing and that it would therefore draw on this experience to look at efforts to tackle non-compliance in the private sector.
It is important that we close tax loopholes that cost the public purse billions of pounds a year, including by bearing down on disguised employment. However, I am concerned that IR35 shifts the entire burden of taxation on to contractors. The government’s changes risk having a negative impact on people unwillingly caught in self-employment, rather than wealthy tax avoiders. We need a wholesale review of the package of measures offered to self-employed individuals.
Self-employment can bring many benefits, freedoms and flexibilities to people, as well as making a vital contribution to our economy.
There are real concerns that workers are being forced into self-employment by unscrupulous employers to avoid costs and their duties to workers. The law is struggling to keep up on this issue.
We should set up a dedicated commission to modernise the law around employment status, including new statutory definitions of employment status. As the Association of Independent Professionals and the Self-Employed has noted, a statutory definition of self-employment would be a serious step forward towards addressing disguised employment.