Second Report - Lessons from implementing IR35 reforms
Select Committee
Public Accounts Committee
HC 60
25 May 2022
Government Response (AI assessment · 20 of 22 classified)
Accepted
6
Recommendations
1 results
6
Acknowledged
Despite years of reforming the IR35 rules, there are still structural problems with how they...
Recommendation
Despite years of reforming the IR35 rules, there are still structural problems with how they work in practice. The IR35 rules do not work well with the realities Lessons from implementing IR35 reforms 7 of contracting, both in determining workers’ …
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Government Response Summary
The government agrees with the committee's recommendation to review the system, but the response primarily describes existing processes for addressing tax collection issues and ongoing efforts to improve data collection and prevent double taxation, without committing to specific new actions or a timeline for the review itself.
HM Treasury
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Conclusions (5) Observations and findings — click to expand
9
Conclusion
Acknowledged
Since 2021, individuals have had the statutory right to raise a dispute with their hirer if they disagree with their status determination, and the hiring organisation must respond formally within 45 days. If both parties continue to disagree, the worker does not have an independent route for further appeal, but …
Government Response Summary
The government acknowledges the conclusion and notes that there are established appeal routes for customers who disagree with tax assessments, but asserts that the reforms to the off-payroll working rules were the best way to achieve correct employment status from the start.
12
Conclusion
Acknowledged
The IR35 reforms made hiring organisations responsible for determining a contractor’s tax status.21 HMRC told us it interprets IR35 as applying to individual engagements, but that courts have not always taken the same approach. In particular, recent court rulings suggest that it may be necessary to consider a contractors’ work …
Government Response Summary
The government agrees with the committee's recommendation to review the system, but the response primarily describes existing processes for addressing tax collection issues and ongoing efforts to improve data collection and prevent double taxation, without committing to specific new actions or a timeline for the review itself.
13
Conclusion
Acknowledged
The realities of contracting also mean that hiring organisations will likely not have the data required to identify and correct mistakes when workers have been incorrectly engaged on a self-employed basis. In particular, the hirer would not normally collect a worker’s National Insurance number if they are self-employed. However, if …
Government Response Summary
The government agrees with the committee's recommendation to review the system, but the response primarily describes existing processes for addressing tax collection issues and ongoing efforts to improve data collection and prevent double taxation, without committing to specific new actions or a timeline for the review itself.
16
Conclusion
Acknowledged
Stakeholders have for some time reported that risk-averseness of hiring organisations could result in a decision to stop engaging freelance contractors.30 More recently, surveys conducted by organisations that represent or provide tax advice to contractors have found substantial numbers of contractors reporting that their last clients either completely ceased using …
Government Response Summary
The government agrees with the committee's recommendation to research the impacts of the IR35 reforms, and the response primarily describes existing and planned research efforts.
18
Conclusion
Acknowledged
In addition to understanding the impact of the reforms on the economy and workforce as a whole, it is also important to establish whether any sectors have been disproportionately affected and what additional guidance or support may be needed. For example, issues in UK supply chains have been widely reported …
Government Response Summary
The government agrees with the committee's recommendation to research the impacts of the IR35 reforms, and the response primarily describes existing and planned research efforts.