IR35 Scrap and Replace?

Lis Truss, has recently pledged to review IR35 regulations if she is successful in her campaign to become the next UK Prime Minister. The regulations came into effect in April 21 and led to employers becoming responsible for assessing workers’ employment status. It also led to said employer becoming responsible for all tax and national insurance (NI) contributions for agency workers and self-employed workers.

Truss proposed, in a article in The Sun newspaper, that an IR35 review that caters for fact that self-employed workers are not entitled to some of the rights of being a full-time employee, such as paid-holiday.

Since its introduction there has been an increase in the number of ‘umbrella companies’ which take the administrative burden of IR35 – questions have been raised over the viability and legality of some umbrella firms.

Although tax specialists have welcomed the focus from Truss on IR35 to help small businesses, they  believe that Truss’ simple review would not be a strong enough when action is required. Dave Chaplin, CEO of tax compliance firm IR35 Shield was reported to say: “The so-called reforms are a flawed botch and have simply served to strangle contractors and those businesses that hire them. IR35 is an iron shackle, impeding flexible workers who can help deliver growth just when the UK economy and UK plc need them.”

Chaplin added that the current IR35 regulations should be scrapped and replaced with a system that better suits the needs of workers.