Government Responds to Lords Report

Government Responds to Lords Report

The government has published its response to the House of Lords report on Off-Payroll working. The IR35 reform is set to be enforced in the private sector from 6 April 2021 following a 12 month delay due to Covid-19. MP David Davis campaigned for changes to the IR35 reform in the private sector to be delayed until 2023/2024. However, an amendment to the Finance Bill was passed through the House of Commons with no changes.

In their official response to the Lords report, HMRC stated: “The government has carefully considered the Sub-Committee’s report into the off-payroll working rules. Whilst the government is still committed to introducing the reform to these rules in this Finance Bill, with an implementation date of 6 April 2021, it agrees with the Sub-Committee that the delay should be used productively and effectively.”

The response offers no concrete solution on fundamental issues such as CEST, blanket rulings and workers’ rights. HMRC added that it disagrees with the sub-committee’s view that the CEST tool is not fit for purpose, despite the fact that it has been proven unreliable on many occasions at IR35 tribunals.

On the subject of widespread PSC bans that force contractors out of their limited companies and onto the payroll, HMRC argue that, “Organisations are free to decide how to structure their workforces and how to engage workers”. The legislation also allows for role-based assessments, which could be seen to encourage blanket ‘inside’ IR35 determinations.

In response to the report’s suggestion that reform is further delayed in light of the many issues with the legislation and the unknown impact of Covid-19, HMRC said, “Any additional delay would have significant drawbacks; it would not address the fundamental unfairness of taxing two people differently for the same work.” However, they did not address the disparity in treating contractors as ‘employed for tax purposes,’ while granting them zero employment rights.

It was also revealed that Boris Johnson and Rishi Sunak both stepped in to ‘influence’ MPs against voting for the Finance Bill amendments that would have delayed private sector IR35 reform until 2023/24. It was reported that The Chancellor and the PM personally intervened to ask MPs not to vote for amendment 20 – this goes some way to explaining why the amendment failed despite enjoying initial widespread support.

While the government’s response is frustrating, it clearly indicates that IR35 reform will be arriving in the private sector next April. Contractors, businesses and agencies are advised to prepare for the changes ahead. Amaze Umbrella’s service has undergone rigorous assessment to attain FCSA accreditation, giving you a fully compliant IR35 solution. Our service also offers benefits of employment that permanent staff receive as well as Perkbox* benefits, insurance cover and a seamless on-boarding experience from our first-class customer service team. To speak to a member of the Amaze team see here.

*Perkbox services are available to contractors paying the qualifying service fee. Please contact us for information.

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