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IR35: Lords investigation told ‘people don’t know where they stand’

IR35

A House of Lords investigation into upcoming IR35 reforms has been told that additional guidance is needed on employment definitions in the UK.

The Finance Bill Sub-Committee inquiry yesterday took evidence from the Unite union and the Centre for Research on Self-Employment ahead of the new tax measures for the private sector coming into force on April 6.

Professor Patricia Leighton, from the think tank, said there is “an incredible level of concern, worry and people just don’t know where they are standing at all”.

She highlighted that there is currently “no statutory definition of either self-employment or an employee” which makes it “almost impossible” to predict how cases will go in court.

It comes as new tax changes come into force for the private sector – known as IR35 – next month, aimed at stopping employees from registering themselves as freelance contractors in order to pay less tax.

The move will widely affect the North Sea oil and gas industry and the large percentage of workers operating “personal service companies” (PSCs), placing those doing similar jobs under the same taxation regime.

Every medium and large private sector business in the UK will be required to determine employment status, which is expected to reduce the number of PSCs in the oil and gas sector.

HMRC estimates that non-compliance will cost the Exchequer more than £1.3billion a year by 2023-2024.

Patricia Leighton of the Centre for Research on Self-Employment (left) and Siobhan Endean of Unite gave evidence to the House of Lords sub-committee

Siobhan Endean, national officer for equalities at Unite, said “sham contracts” do take place, but better guidance is needed for those people caught in the middle.

She added: “An ACAS (Advisory, Conciliation and Arbitration Service) statutory code of practice in relation to this would be really, really helpful and research almost by sector to identify guidance (needed).

“I think that would be a specific area that would be really helpful to have guidance for genuine self-employed people and freelancers.

“At the end of the day we’re relying on employment case law in relation to defining employment status and it is clearly not enough or satisfactory.

“We need to be able to say to our self-employed workers that this is what the legal definition of what a self-employed worker is.”

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