Conservatives urged to join Labour, Lib Dems and SNP in committing to post-election IR35 review

Pressure is growing on the Conservative Party to commit to a review of the IR35 tax avoidance regulations as a pre-election pledge now the Liberal Democrats, Labour and the Scottish National Party (SNP) have all vowed to do so.

The SNP is the latest political party to set out plans to review the IR35 rules in its election manifesto, along with a commitment to address the problems arising from the loan charge disguised remuneration policy.

The latter is a retroactive tax change that has seen thousands of IT contractors pursed by HM Revenue & Customs (HMRC) for taxes that it claims they owe on work carried out up to 20 years ago, while the IR35 reforms are intended to clamp down on disguised employment.

From 6 April 2020, medium to large private sector firms will join public sector organisations in becoming responsible for determining whether the contractors they engage with should be taxed in the same way as permanent staff (inside IR35) or off-payroll employees (outside IR35).

When this change was introduced in the public sector, it prompted mass walkouts of IT contractors across various government departments, who objected to having their outside IR35 engagements reclassified as inside IR35 on the grounds that they were being taxed in the same way as permanent employees, while being exempt from receiving paid holiday, sick leave and pension benefits.  

Dave Chaplin, director of the 2,000-strong Stop The Off-Payroll Tax campaign group, said the SNP’s IR35 review would halt the Conservatives’ current plan to extend the IR35 reforms to the private sector next year.

“We now have three major political parties committed to halting and reviewing the off-payroll tax and showing their support for the UK’s flexible workforce,” he said. “We hope the Conservatives will see sense and also drop their plans and back a review.” 

As previously reported by Computer Weekly, the Liberal Democrats emerged as the first party to include a pledge within its manifesto to review the Tories’ plans to extend the controversial off-payroll tax avoidance reforms to the private sector in April 2020. The Lib Dems also promised that, should they come to power, they would scrap the loan charge policy altogether.

On Monday 25 November, Labour’s shadow small business minister, Bill Esterson, told attendees at the Freelance and Small Business Debate – an event organised by the Association of Independent Professionals and the Self-Employed (IPSE) – that the party would call a halt to the IR35 reforms being rolled out to the private sector, and later confirmed this as policy.

“We need to support the self-employed in this country,” said Esterson. “We need to make sure that our tax system is diverse so that it matches the needs of being self-employed and is also consistent with the risk that is taken.”

Update 29 November: Esterson subsequently clarified his comments to say the Labour Party is not planning to halt or scrap plans to extend the reforms to the private sector, but will conduct a review, as detailed here.