MPs vote against further IR35 reform delays

A 2021 reform date appears set in stone.

On the 1st of July, MPs voted against an amendment that proposed a 2023/2024 IR35 reform roll out. This means changes to the off-payroll working rules will now certainly be introduced in the private sector next year.

Despite significant opposition, it seems set in stone now that as of the 6th of April 2021 it will be the end client’s responsibility to determine the IR35 status of their contractors.

The vote held at the Report Stage of the Finance Bill saw 317 Conservative MPs reject the amendment. The 254 MPs who in favour of an extension to the delay represented other political parties and included 180 Labour MPs.

MPs address mounting concerns:

During the lively 2-hour debate, it became clear many MPs were not in favour of setting a 2021 implementation of the reform, with a number even arguing against the legislation itself. High-profile politicians such as David Davis and Sir Ed Davey proved worthy opposition, highlighting their numerous concerns which are as follows:

Fears of zero rights employment. This appeared to be a concern shared by many, that the changes to the off-payroll working rules will create zero rights employment. In other words, a group of workers that lack the security and rights of employees yet are subject to employment taxes.

Another shared concern was relating to the highly critical House of Lords report into IR35, which found the legislation to be “riddled with problems, unfairness, and unintended consequences.”

The Government was criticised for rejecting the ‘Off-payroll working: treating people fairly’ report, which called for a complete rethink of the legislation itself. Such recommendations focused on a thorough analysis of the IR35 legislation and its potential impact. For more information of what was covered in the report, take a look at our article exploring the House of Lords’ damning IR35 report.

On top of these concerns, concerns were also raised about introducing IR35 reform during a time of huge economic uncertainty. Several MPs made it clear they do not believe  implementing reform will be straightforward due to the current challenges facing the UK economy.

Jesse Norman dismisses concerns:

Despite two hours of heated debate on the issue, The Financial Secretary to the Treasury, Jesse Norman, dismissed these concerns in minutes, as he made clear his stance against a further delay to IR35 reform.

Norman urged politicians to vote against the amendment by reiterating the Government’s argument that IR35 non-compliance will cost the Treasury well over a billion pounds every year. With this considered and the amendment rejected by MPs, IR35 reform was accepted as part of the Finance Bill with the implementation date set for April 2021.

What now?

With the Finance Bill passed through the House of Commons, there is little left to do. After a third and final reading, the Bill will pass through the House of Lords. This is considered a formality and therefore we expect to see very little change. A last-minute U-turn as far as the IR35 reform date is concerned is now considered to be off the table.

Therefore, it is vital that private sector companies consider the changes that will be implemented on the 6th of April 2021. As with the public sector IR35 reform, the importance of being prepared cannot be underestimated. When it comes to the changes to the off-payroll working rules, you should ensure your business has the right processes in place.

While IR35 reform is needless and short-sighted, it should not be feared by private sector businesses. Becoming responsible – and in many cases liable – for IR35 is daunting task, however, with a careful and measured approach the changes are manageable.

We have an informative page detailing the steps you can take in Preparing for IR35 Reform. Please contact a member of our team to discuss the support that Qdos can offer your business.

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