The House of Lords Finance Bill Sub-Committee's report on Off-payroll working was published on Monday 27th April. Launched at the beginning of February, the Lords investigation took a wider line of inquiry than the Treasury’s official IR35 review. During many hearings, the committee heard damning evidence of the widespread damage that the reforms have caused, with committee members often expressing disbelief at the legislation’s inherent flaws and unfairness.
This sentiment was strongly underpinned in the committee’s report, which concluded that the legislation has not worked properly throughout its twenty years of implementation, and is therefore in need of complete reform. Despite the delay to the reforms in light of the Covid-19 outbreak, the report emphasised the danger of reintroducing the flawed legislation next year when businesses will be attempting to recover from the crisis.
Central to the report’s findings was the conclusion that the Government had given insufficient consideration to the issues and concerns raised by stakeholders before deciding to extend the reforms. These ‘oversights’ include underestimating the considerable cost to businesses of implementing the changes, and the widespread damage and disruption as contractors were subjected to blanket assessments.
Another significant area of concern was the inherent discrepancy in being ‘employed for tax purposes’, which left many contractors as ‘zero rights employees.’ The report concluded that separating ‘employment status for tax purposes’ from ‘employment status under employment law’ also fails to acknowledge that contractors bear all the risk for providing the workforce flexibility from which both parties benefit. The Committee therefore called on the Government to keep its promise on implementing the recommendations of the Taylor Review.
In summation, Lord Forsyth of Drumlean, Chair of the House of Lords Sub-Committee, said: "The Committee welcomed the Government's decision to defer these off-payroll working rules in the wake of the Covid-19 pandemic. However, our inquiry found these rules to be riddled with problems, unfairness, and unintended consequences. The potential impact of the rules on the wider labour market, particularly the gig economy, has been overlooked by the Government. It must devote time to analysing all of this. A wholesale reform of IR35 is required.”
The news came after the Treasury announced that they are suspending current IR35 inquiries while the department is diverted to overseeing the management of the Coronavirus Job Retention Scheme.
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