IPSE responds to new IR35 briefing

(3 minutes to read)

IPSE: “This briefing will be cold comfort to the millions of self-employed who are worried about the looming disaster for the sector when the changes to IR35 come into force next April.”

The IPSE believes that the new government briefing on the upcoming IR35 changes will bring little comfort to the UK’s self-employed.

IPSE’s Deputy Director of Policy Andy Chamberlain, explained, “The government’s new guidance claims that legitimately self-employed people ‘will feel little impact’. Tell this to the thousands of contractors working for Barclays, Lloyds, HSBC and Tesco Bank who have already been told they must move into umbrella companies, go PAYE or cease contracting for these organisations altogether. There will likely be more such damaging decisions as April approaches.

“HMRC is also now claiming that one of the major reasons for the change to IR35 is that at the moment, a self-employed person on £50,000 a year and who ‘doesn’t follow the rules’, will pay £6000 less tax. It then admits that ‘this includes employer NICs contributions of around £5000’. This begs the question: why is HMRC hounding the self-employed for tax that should come from employers? The focus should be on clients who engage them.”

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Chamberlain added, “It is also disappointing that HMRC is still stubbornly standing by the CEST tool, which is the source of so many IR35 woes. HMRC has lost the vast majority of IR35 tribunal cases since 2017 – based on CEST tool rulings. You also have to wonder: if HMRC is so confident in the CEST tool, why is it changing it now?

“The truth is the CEST tool is extremely unreliable. In fact, HMRC admits that in 15 per cent of cases it cannot even provide a determination. The tool comes out with incorrect determinations – or does not produce a judgement at all – because it does not account for mutuality of obligation between a self-employed person and their client.

“The tool does indeed urgently need to be refined and updated, but in all our talks with HMRC, they have been adamant they will not change it to factor in mutuality of obligation. Therefore, we doubt this ‘enhanced version’ will improve matters at all for the self-employed. They still face disastrous changes to their tax system, based on a fundamentally flawed tool. We urge the government to recall and rethink this ill-conceived plan before it is too late.”

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