David Davis, a longtime critic of IR35, has tabled an amendment to the Finance Bill tomorrow (Tuesday 19th May), which – if passed successfully – would delay the private sector Off-Payroll legislation until 2023.
The implementation has already been pushed back to April 2021, following the COVID-19 outbreak, but should this amendment pass, the delay will be increased by a further two years. During this time, critics of IR35 hope that the rules will be abandoned altogether, or for the Off-payroll element to be ditched at least.
Critics were surprised to see the private sector Off-Payroll rollout included in the second reading of the Finance Bill in April, which makes a good result tomorrow even more important.
For the Davis amendment to pass, it will require a house majority, meaning a substantial number of Conservative MPs would need to rebel against the Government line. The exact number depends on MP turnout and the votes cast by opposition MPs.
In this exclusive interview, Dave Chaplin, Director of the Stop The Off-Payroll Tax campaign, explains how the campaign has culminated with this event, and what the future looks like – with, or without – the Off-Payroll rules.
Technically speaking, what will happen next in Parliament?
I’m certainly not an expert in Parliamentary procedure; for that, you should refer to Erksine May. However, in this case, David Davis has tabled an amendment to the resolution, so that the Off-Payroll legislation will enter the Committee Stage with the amendment already added to the draft legislation. That is if the amendment has majority support of the House.
However, having met the Financial Secretary of the Treasury twice and senior members of HMRC, who are in charge of Off-Payroll, they are fully gung-ho on this going ahead, so we can expect the whips to be busy, establishing the numbers.
If Davis has the numbers, my guess is they will pull the resolution prior to a vote. And even if it goes to a vote and is won, they might still pull the resolution. They could then try and reintroduce the legislation unchanged in the next Autumn Budget, and still target 2021, but this would still be met with resistance. More so, because our campaign numbers are increasing too; we have almost 3,500 activists now.
You have been in touch with key Conservatives for some time now. Why can’t senior members of the party see the damage that IR35 has done?
The reality is that many of the economically literate ones do understand the damage, and strongly oppose the legislation. I’ve met MPs who have been in cabinet, on various select committees, and ones that are ex-contractors. There are those that aren’t interested, especially ones with large majorities, and also the ones who are brainwashed by the misleading rhetoric dispersed by HMRC and Treasury. But many of them totally get it when it’s explained to them.
It’s important for contractors to realise that the success of the campaign is down to them personally. They have to visit their MPs and explain the problem to them. It’s the only way to get the MPs on board. So, that’s what we’ve been doing for the last few years. Rallying contractors, and loading them with all the fact-based arguments.
Alongside that, we’ve been conducting considerable amounts of investigative journalism to expose the mistruths behind some of the Government claims and sharing that information with national newspapers. Because, for many MPs, if it’s not in the news, it’s nothing to worry about.
This is why we are extremely grateful to all the media outlets who have consistently listened and supported us. Unfortunately, some industry publications appear to have purposefully ignored our campaign, which is disappointing, as they have done their contractor readers a disservice.
The House of Lords recently published a highly-critical report into the Off-Payroll legislation. What influence do you think this report has had?
The Lords Report was a spectacular treatise on everything wrong with IR35 and the Off-Payroll Tax. They totally understood all the concerns the market experts have been expressing for years and backed it up with solid witness evidence. It added considerable credibility and notched up the pressure.
And with COVID-19, the Government was snookered, with no option other than to postpone the introduction. The concession of an intended one year delay always looked like a churlish reaction because they hadn’t got their way.
Given the Lords and MPs’ valid concerns, it seems perverse to think they would put clearly flawed legislation onto the statute for any time in the future. Why plant a ticking time bomb again? The message we are saying is to pause, review, and resolve.
What can contractors do now to help the ongoing fight against IR35?
The answer to this is the same as it’s been for the last three years of campaigning: sign up to the Stop The Off-Payroll Tax campaign, receive all the email briefings, and then contact and meet your MP frequently and argue the case. And also, please support IPSE, which has been fighting against IR35 since it was first implemented, back in 1999.
We are all active on social media too – so please follow the campaigners, and retweet our posts to your MP.
What does your crystal ball say for the long term future of IR35?
I don’t think HMRC will ever win the IR35 battle, as their poor results in the courts prove. They’ve tried to mislead the market on matters of status law, to scare firms into hiring contractors as “employed for tax purposes”, where they have no rights but are taxed as employees – often picking up their clients’ new employers’ NI tax bills via questionable arrangements.
In my view, that won’t continue as the market will readjust as it did 20 years ago when I was contracting. It will get its ducks in a row again, and all parties in the supply chain will be on board and have correct processes in place. Then HMRC will have even less chance of winning their “disguised employment” arguments in court.
But, it’s not law yet. COVID-19 has exposed “deemed employment” for the completely unfair situation that it is – “zero rights employment”. HMRC can no longer play the “fairness card”, making it harder for them to push this through Parliament.
Let’s see what happens tomorrow.