Why repealing the IR35 off-payroll rules is a populist folly which a new UK government must turn down

With a UK general election in just 22 days’ time, the future of work for independent contractors is potentially going to get rewritten, and even revamped, very soon.

While repealing the April 6th 2017/2021 Off-Payroll Working (OPW) rules and revisiting IR35 often dominates the discussion among contractors, it's time to move beyond simplistic narratives and explore a more nuanced path forward, writes Chris Bryce, CEO of the Freelancer & Contractor Services Association (FCSA).

Different approaches, both in the name of ‘fair’ taxation

Both the OPW and IR35 rules represent attempts by successive governments to tackle what they have regarded as disguised employment, to ensure what they call “fair” tax contributions. But the approaches of Labour (which introduced IR35) and the Conservatives (which introduced the OPW rules) differ significantly.

My view concerning all limited company engagements, is that while simply reverting to IR35 (of 2000) might offer temporary relief (because the 2017/21 rules would be no more), it wouldn't address the underlying issues of unclear employment status and inconsistent enforcement.  

Another arbitrary set of rules?

Labour's proposal of a 'Single Worker Status' might hold promise.

But pending new detail from Labour’s 2024 election manifesto which is expected to be published in the next few days, the success of SWS hinges on accepting that many people actively prefer to be self-employed; carry out business on their own account and don’t want to be pigeon-holed by arbitrary rules.  

A clear understanding of that -- and a recognition of the value to UK plc of our sector, must feed into any definitions and implementation which a victorious Labour party on July 4th goes on to create.

Here’s one vote for not putting Single Worker Status eligibility into the hands of HMRC or engagers

In particular, who qualifies as “genuinely self-employed?” Who wields the power to decide such a status?

Leaving eligibility in the hands of engagers, or HMRC, risks perpetuating power imbalances, and will have a detrimental effect on our contribution to the economy.  

Instead of simply repealing OPW, a wiser approach would build upon the strengths of both existing frameworks and address their shortcomings.  

Three quick-wins to improve the revised IR35 legislation

Here are some possibilities – three potential ‘quick-wins’ for Labour or whichever party triumphs at the end of polling day.  

1. Refine the ‘single status’ concept:

Develop clear definitions and distinctions between worker categories based on control, supervision, and risk. This framework must be transparent, predictable, and consistently applied across all sectors and company sizes.  

2. Strengthen enforcement

Ensure consistent application of the rules regardless of industry or revenue levels. Collaboration between tax authorities, businesses, and independent workers is crucial to achieving this goal.  

3. Improve communication and collaboration

Open and transparent dialogue among and between all stakeholders is essential for developing a workable and equitable system. Engaging with contractors, businesses, and tax authorities allows for a collective understanding of challenges and solutions.  

Focusing on these three aspects promises a more sustainable and equitable solution than an “us versus them” repeal of IR35/OPW. The aim of the next government when it considers the flexible workforce shouldn't be about political wins, but about creating a fair, efficient, and predictable system for everyone involved.  

My final message to the occupants of No 10/11 Downing St on July 5th

By looking beyond repealing the existing IR35 and OPW rules and instead exploring collaborative solutions, the new government could foster a future where all workers, regardless of their employment status, have clarity, security, and fair treatment. This approach would empower all stakeholders and paves the way for a thriving and inclusive labour market in the UK.

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Written by Chris Bryce

Chris Bryce is Chief Executive of Freelancer and Contractors Services Association (FCSA) – fcsa.org.uk - and was previously CEO of The Association of Independent Professionals and the Self Employed (IPSE). Before that he was a contractor for more than 25 years, and as a result has developed a keen eye for the problems faced by contractors in the post-IR35 era.

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