This month has seen long-anticipated new off-payroll working rules take effect, after a year of coronavirus-related delays. The reform, which kicked in from 6th April, is aimed at helping HM Revenue & Customs to assess whether a contractor is genuine or essentially being used as a “disguised employee” for tax purposes. 

The Government has argued in favour of the legislation as a means of ensuring every worker pays their fair share of tax. However, a Parliamentary inquiry on how freelance working and contracting should work in the UK has now weighed in on the changes, suggesting that the legislation ought to be re-examined to ensure the rights of self-employed workers. 

What does the report state? 

The report from the Loan Charge All-Party Parliamentary Group (APPG), entitled How Contracting Should Work, raised various issues around the new rules. It scrutinises the factors that have given rise to tax avoidance schemes, as well as the changes that could be contemplated to help deter their use in the future – and particularly, what could be done to prevent another Loan Charge scandal. 

In the words of the report: “We believe that the off-payroll reforms, which are now being rolled out into the private sector from April 2021, should be amended during the passage of this year’s Finance Bill and that tax law and employment law should be aligned. The direct threat of being classed as a ‘deemed employee’ is a fundamental problem for contractors/freelancers and client organisations.” 

The report went on to urge the Treasury and HMRC to “stamp out the abusive practices” outlined in the document, adding: “All ‘inside IR35’ workers should get full rights under all legislation dealing with agency workers, with a clear and transparent right to holiday and sick pay.”

 “Endless and continuous changes to the UK tax framework” 

Also referenced in the report was IT contractor Andy Stokes, who expressed his concern with how the system works, and what he described to the inquiry as “the endless and continuous changes to the UK tax framework which are supposedly designed to address such avoidance issues”. 

He referred to the IR35 rules as “fundamentally flawed”, adding that “such items are overly complex, detract from the core activities of business, and in my opinion are damaging to the health and wellbeing of both individuals and the economy in general.” 

Mr Stokes also signalled that he felt many freelancers and contractors hadn’t been adequately supported during the COVID-19 pandemic – a situation he attributed to “lack of concern” or “lack of understanding” and a failure to recognise the role played by these workers across the country. 

Improvements to rights and benefits encouraged to provide “certainty” 

The APPG called on the Government to look at how people ought to structure their work to ensure proper recognition and protection in the future. 

The issue of contractor and freelance workers’ rights is one that has especially come to the fore in light of the high-profile Uber Supreme Court ruling in February 2021. It has led many to ask about employees’ rights and the applicability of the law to them. 

Sure enough, the MPs recommended that tax and employment law be aligned to ensure fairness, stating: “We call on the Government to accept it is unfair for workers who are taxed as employees to be denied the rights and benefits of an employee or recognition in employment law. 

“Anyone who is taxed as an employee should also receive the corresponding benefits; thus, by aligning tax and employment law, certainty for both contractors and hirers will ensue.” 

Here at TS Partners, we provide a complete range of services in relation to tax and accounting in Wellington and Plymouth, including advice and guidance on the implications of the IR35 rules for both contractors and the businesses using them. Simply reach out to us today via phone or email for further information.