Opposition parties have united against proposed IR35 reforms

The general election is less than two weeks away. Businesses are eager to know what to expect from the next government. This week, a consensus appears to have formed among opposition parties, regarding the controversial proposals for handling off-payroll work.

The proposed “IR35” amendments would introduce drastic changes to the way many private sector contractors are paid. However, in the past week, Labour, the Liberal Democrats, and the Scottish National Party have all vowed to review the proposals.

First to announce their position were the Liberal Democrats. Under the “Fairer Taxes” section of their election manifesto, the party pledged to “review recent proposals to change the IR35 rules.”

One week later, the SNP announced a similar stance within their own manifesto. Stating that “SNP MPs will back improvements to tax collection and tougher action on tax avoidance, including… a review of the tax rules around intermediaries – known as the IR35 tax rule – and problems with implementation of the Loan Charge”.

The ‘loan charge’ is an existing tax workaround where contractors would be paid in the form of a loan. HMRC intends to claw back lost tax revenues dating back to 1999 under the scheme.

This week, a spokesman for the Labour party signalled similar intentions. Bill Esterson, Labour’s Small Business Minister, told an industry event that IR35 changes in their current form were unlikely to happen. “We absolutely can’t see it rolled out into the private sector the way things are at the moment”, he told attendees at the Freelance and Small Business Debate.

The shadow minister then took to social media to confirm the party’s position. Mr Esterson was asked (via Twitter) if an IOR35 review was Labour part policy. “Absolutely”, was his response.

Consensus against tax reform

The united stance among opposition parties could change the debate on the reforms. It means that the proposed changes are unlikely to occur without a Conservative majority.

But why is tax reform such a hot-button issue for recruiters? Policy and Campaigns Director at the Recruitment and Employment Confederation (REC), Tom Hadley, explained.

“Everyone should pay the right amount of tax, but the last thing business needs right now is rushed, last-minute legislation. These measures will allow government to solve any implementation problems and mitigate against unintended consequences.”

There is a clear desire to update the UK’s complex tax system for the modern age. Earlier this week, we heard how APSCo wishes to introduce a new classification of skilled contractor. Similarly, each of the opposition parties has stated a need for greater fairness, clarification, and transparency in a future system.