On Monday the Government announced the reversal of their decision to repeal changes to the IR35 rules.
HRreview has gathered expert insights into what this means for the labour market.
Chancellor’s IR35 move is a “backward step”
Paul Farrer, Chairman and Founder of recruitment agency, Aspire says:
“What do businesses need most in times of economic uncertainty? Flexible workers – freelancers and contractors who keep them lean, agile and able to navigate peaks and troughs in demand. IR35 reform creates unnecessary barriers to engaging these workers, preventing businesses and the wider economy from reaping all the rewards of freelance workers.
“The news that IR35 reform will no longer be repealed is a backward step, not just for workers, but for the recruitment industry and businesses that rely heavily on the flexibility and skills of the independent workforce.”
Reversing IR35 reform repeal leaves sector ‘lost for words’
Qdos CEO, Seb Maley, commented:
“I’m lost for words. The chaos, uncertainty and disruption caused by the mini-Budget is unprecedented. While U-turning on some tax cuts made sense, cancelling the repeal of IR35 reform is the wrong decision at the wrong time. It’s a knee-jerk reaction from the government and, in my opinion, won’t benefit the economy.
“IR35 reform damages the flexibility of the UK labour market, which is key to economic growth. Many contractors left the sector after risk-averse businesses stopped engaging them. Repealing reform would have opened the floodgates – a catalyst for the recovery of this sector.
“With IR35 reform now remaining in play, businesses must continue prioritising compliance. The legislation is complex and navigating it can be a challenge, but with the right approach can, in fact, be managed.”
Scrapping the reform repeal shows ‘massive oversight’
Fred Dures, Founder of PayePass, commented:
“Scrapping the IR35 reform repeal shows massive oversight. Panicking and backtracking on the promise to abolish these changes won’t have the desired effect. In fact, U-turning on this pledge is likely to lead to more problems.
“IR35 reform has caused unnecessary complexity, leading to major issues for contractors, recruitment agencies and the businesses engaging these workers. It has seen a tidal wave of tax avoidance schemes entering the market – ones that lure in unsuspecting contractors and pose a huge threat to the entire supply chain.
“By keeping IR35 reform in place and not delivering on promises to regulate the umbrella industry, this see-sawing government is failing the flexible workforce.”
Russell Upton, Director of Key Accounts at Parasol said:
“After a lot of confusion for contractors over the past few weeks, it seems we finally have some clarity on how agencies and end clients should deal with IR35.
“Today’s announcement was somewhat inevitable, especially as the original mini-budget did not come with a fully-costed plan and was not put in front of the OBR.
“This means IR35 reform and practice will stay the same as before the mini-budget, with contractors continuing to receive an SDS from the end client, who will retain the responsibility of determining whether the assignment is inside or outside of IR35.
“After several years of changes and debate on IR35, and millions paid through taxes annually by UK contractors, they deserved more than this short-sighted plan for off-payroll reform, which was always destined for the scrapheap.”
Dave Chaplin, CEO of tax compliance firm IR35 Shield said:
“The government’s initial commitment to repealing the Off-Payroll rules was a sensible initiative and would have been a significant step forward for the UK’s army of self-employed people who are critical to the Government’s pro-growth agenda.
“Repealing Off-payroll would have returned an essential level of certainty to contract transactions in the market economy, leading to economic growth. Instead, Off-payroll will continue to cause significant harm to the self-employed, major businesses, the government, and the economy.
“Whilst we agree that tax avoidance measures are sensible, the Off-payroll rules over-extended, causing genuinely self-employed contractors to lose their rights to being their own boss.
“The Conservatives U-turn on the repeal has thrown around half of the genuinely self-employed contractors under the bus, and likely kissed goodbye to their success at the next General Election.
“With the anti-growth effects of Off-payroll, it appears the pro-growth Conservatives have now joined the Anti-Growth Coalition – as the saying goes ‘we are all in this together.”
Crawford Temple, CEO of Professional Passport said:
“The Off-payroll rules that were rolled out to the public and private sectors in 2017 and 2021 were ill-thought-through and damaging for the UK economy. It would appear that the Government also recognises this by announcing the repeal. However, that repeal is now not proceeding. The OPW rules were built on already fundamentally flawed IR35 legislation and so we now call for a considered approach and a proper review that Liz Truss promised as part of her ministerial campaign.”
Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at the University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.