Could IR35 now struggle to obtain support?

Following the recent Lords report, IR35 has faced a significant amount of criticism, stating that the legislation is ‘flawed’.

While Financial Secretary to the Treasury, Jesse Norman, originally stated that IR35 will be rolled out April 2021 as planned, ignoring the report’s findings, critics now believe he may have spoken too soon.

Speculation has now arisen that the Government may struggle to push through IR35 without amendments.

Especially as there is a considerable amount of support to stop the legislation with movements such as Stop The Off-Payroll Tax Campaign gaining backing from MPs.

Combining support from the wider public and MPs with the Lords report could prove to be a huge hurdle for voting the measure into the Finance Bill.

Additionally, if IR35 does get through Commons with no changes, the National Insurance provisions must also go through the Lords where the government will no longer have a majority.

Why has the Lords report been so damaging?

It seems the report has not only highlighted major issues but subsequently opened the door for reform.

Umbrella criteria: One of the biggest criticisms IR35 receives is that the criteria are far too broad and discouraging of contractual work.

COVID-19: We’re currently facing the worst crisis of our generation and many are worried the burden IR35 will place on businesses is too much.

Flaws: A sense of unfairness surrounds the legislation as contractors usually pay greater employment taxes and adding the National Insurance Contribution may be too great a burden. Also, while contractors would be treated as an employee for tax purposes, criticism has been raised that they won’t benefit from the same employment rights.

What is likely to happen?

The general consensus when a tax change is introduced is that there is always a winner and loser.

Though the Lords report suggests several tax options that could provide a similar result with less of an economic impact.

However, it’s currently all speculation and there is no definitive conclusion to say whether the suggestion would work as an alternative to IR35.

In the meantime, you can stay up to date on all the latest payroll changes on our blog and if you’re looking for support on COVID-19, check out our hub.