In a report which it has given to the Financial Times but has not published to the public which paid for it, the House of Lords Economic Affairs Committee has come our swinging on IR35. But are its criticisms accurate? THREAD on.ft.com/2WfaQpd
First, they say IR35 hasn't worked properly through its history.
That is true. When it was introduced in 1999 Government caved to big business lobbying and switched the burden of operating it to £100 intermediaries who had little reason to care if they got it right...
That is true. When it was introduced in 1999 Government caved to big business lobbying and switched the burden of operating it to £100 intermediaries who had little reason to care if they got it right...
These changes switch the burden back to the ultimate employer that was originally intended to operate it. In other words, they fix it.
Second the measures "privatise tax compliance". That is flat wrong. As things stand, the burden of complying lies on the £100 company; the changes move it to the ultimate employer. Tax compliance was already privatised. (And we all have an obligation to get our tax returns right)
I stand corrected by @Alain_Tolhurst. It has been published (committees.parliament.uk/committee/230/…) albeit not on the Committee's page. My bad.
Third, the report says the changes "impose a new burden on business". They don't. The burden already existed, as I have pointed out, on the £100 company.
Fourth the report complains that "revenue-raising is the major driver of the proposed changes." Strange criticism of a tax measure, that it should raise tax, but the criticism is also wrong. The measures impose no new tax, they merely seek to prevent avoidance of an existing one.
Fifth, the report focuses on the flexibility of the labour market. Not sure what is meant by this but the measures leave employers/employees with the same freedom to contract. If the employer engages individuals who are basically employees why should they not be taxed as such?
Sixth, the Chairman says the measures tax individuals who work as employees without giving them the same rights. That has been a feature of the tax landscape for decades - including under the existing version of IR35. Individuals are usually compensated with higher rates.
The reality is that there is a vast class of (largely) higher-earners who have avoided paying the right amount of tax for decades because lobbied changes at the outset of IR35 made it practically impossible to enforce. They are (rightly) targeted by these measures.
