IR35 tax reforms for UK freelancers glide through committee stage: D-Day set for 6 April 2021

*Cough* But are they freelancers? *cough* – HMRC

IR35 tax reforms remain set to come into force on 6 April 2021 as the 2019-20 Finance Bill passed through its committee stage.

Despite a report from the House of Lords calling for a complete rethink of the proposed legislation and a tabled amendment from David Davis MP, attempts to delay and amend the new rules have been thwarted.

The reforms to the IR35 rules make large and medium-sized businesses responsible for determining the employment status of contractors for tax purposes, rather than the contractors themselves doing this. The rules are designed to make contractors deemed to work as staffers pay similar income tax and national insurance contributions to employees. The measure came into effect in the public sector in 2017.

IT contractors fear companies' assessments of their tax status are not always accurate while the new responsibilities risk scaring firms away from hiring freelancers for fear of the complexities involved. Yet others complain they're being pushed into umbrella companies and PAYE situations, with claims of an "effective pay cut of up to 30 per cent". These issues have led to considerable frustration in the community.

Seb Maley, CEO of IR35 tax advisors Qdos said: “It’s hugely disappointing, albeit unsurprising, that MPs have given the 2021 rollout the green light. For years, the Government has mistakenly been under the impression that contractors abuse the IR35 rules. In our experience, this simply isn’t the case.

“If mismanaged, these changes pose a real threat to contractors, the recruiters who place them and the businesses that engage them. It is vital that companies impacted by IR35 reform continue their preparations and ensure they are in a position to make accurate IR35 decisions well in advance of the implementation date,” he said.

Some companies have introduced blanket bans on use of personal service companies under the rules to avoid any liability and what they may deem as unnecessary HMRC scrutiny.

Contractors took to Twitter to vent their frustrations that the new rules, originally due to be introduced on 6 April this year, are set to come into force without further delay.

"IR35 will be a disaster...everyone can see that except a few Tory loons," one opined.

In April, the UK's House of Lords produced a report on the proposed changes to the off-payroll tax regime which concluded the proposals required a complete rethink.

"The government has not sufficiently analysed the unintended behavioural consequences of the proposed reforms. Contractors are already being laid off, despite the reforms' delay. Many witnesses told the Committee that the rules have made them 'zero-rights employees' with none of the rights of being an employee, or the tax advantages of being self-employed," the report stated.

For its part, the government has said a delay would not address the intrinsic unfairness of taxing two people differently for the same work and would come at financial cost to the exchequer. ®

Similar topics

Broader topics

Narrower topics

Other stories you might like

  • Cheers ransomware hits VMware ESXi systems
    Now we can say extortionware has jumped the shark

    Another ransomware strain is targeting VMware ESXi servers, which have been the focus of extortionists and other miscreants in recent months.

    ESXi, a bare-metal hypervisor used by a broad range of organizations throughout the world, has become the target of such ransomware families as LockBit, Hive, and RansomEXX. The ubiquitous use of the technology, and the size of some companies that use it has made it an efficient way for crooks to infect large numbers of virtualized systems and connected devices and equipment, according to researchers with Trend Micro.

    "ESXi is widely used in enterprise settings for server virtualization," Trend Micro noted in a write-up this week. "It is therefore a popular target for ransomware attacks … Compromising ESXi servers has been a scheme used by some notorious cybercriminal groups because it is a means to swiftly spread the ransomware to many devices."

    Continue reading
  • Twitter founder Dorsey beats hasty retweet from the board
    As shareholders sue the social network amid Elon Musk's takeover scramble

    Twitter has officially entered the post-Dorsey age: its founder and two-time CEO's board term expired Wednesday, marking the first time the social media company hasn't had him around in some capacity.

    Jack Dorsey announced his resignation as Twitter chief exec in November 2021, and passed the baton to Parag Agrawal while remaining on the board. Now that board term has ended, and Dorsey has stepped down as expected. Agrawal has taken Dorsey's board seat; Salesforce co-CEO Bret Taylor has assumed the role of Twitter's board chair. 

    In his resignation announcement, Dorsey – who co-founded and is CEO of Block (formerly Square) – said having founders leading the companies they created can be severely limiting for an organization and can serve as a single point of failure. "I believe it's critical a company can stand on its own, free of its founder's influence or direction," Dorsey said. He didn't respond to a request for further comment today. 

    Continue reading
  • Snowflake stock drops as some top customers cut usage
    You might say its valuation is melting away

    IPO darling Snowflake's share price took a beating in an already bearish market for tech stocks after filing weaker than expected financial guidance amid a slowdown in orders from some of its largest customers.

    For its first quarter of fiscal 2023, ended April 30, Snowflake's revenue grew 85 percent year-on-year to $422.4 million. The company made an operating loss of $188.8 million, albeit down from $205.6 million a year ago.

    Although surpassing revenue expectations, the cloud-based data warehousing business saw its valuation tumble 16 percent in extended trading on Wednesday. Its stock price dived from $133 apiece to $117 in after-hours trading, and today is cruising back at $127. That stumble arrived amid a general tech stock sell-off some observers said was overdue.

    Continue reading

Biting the hand that feeds IT © 1998–2022