Tory MP: IR35 has become ‘Frankenstein’s monster’

The Conservative Party must take the opportunity scrap the IR35 off-payroll working rules and appease a significant proportion of its electorate ahead of the next general election, according to Conservative MP and former Lord Chancellor Robert Buckland.

In an editorial published in conservativehome on Wednesday (12^th July), the MP for South Swindon argued that the legislation is responsible for making contract work less desirable, and that this is restricting the ability of British employers to fill skill gaps.

“While nobly intended to tackle tax avoidance by contractors who work as employees, the legislation’s burdensome and complex nature mean it has become something of a Frankenstein’s monster,” Buckland said.

“The deleterious impact it has had on dynamism, entrepreneurship, jobs, and growth means that there is no better time to slay it once and for all.”

Buckland’s comments come amidst widespread clamour for IR35 to be repealed, which has seen a sharp uptick since former Chancellor Kwasi Kwarteng announced the legislation’s quashing as part of his 2022 Autumn Budget ‘Growth Plan’, only for the move to be reversed by his successor, Jeremy Hunt, just three weeks later.

Commenting at the time, Andrew Timpson, tax partner at RSM UK, complained of the “confusion and ambiguity” created by the government’s U-turn, arguing that this would harm which engage temporary workers as part of their employment model.

Similarly, Seb Maley, CEO of IR35 specialist consultancy Qdos, told Accountancy Age that the move was “the wrong decision at the wrong time”, and one which “damages the flexibility of the labour market”.

Echoing these views, Buckland argued in his article that the reform of IR35 would “add substance” to the sitting government’s pursuit of economic growth, and that this would be “an act of political expediency” with a General Election looming.

“The onerous [IR35] regulations hit a natural constituency of the Conservative Party’s hardest, and its support will be crucial for Conservative prospects come next Autumn.

“As the Labour Party increasingly positions itself as the party of business, it would be foolish not to review IR35 as part of the party renewing its appeal to natural supporters.”

Tory policy change ‘embarrassing’

While in alignment with Buckland’s stance on the repeal of IR35, Dave Chaplin, CEO of IR35 compliance firm IR35 Shield, notes the “embarrassing” nature of the Conservatives’ changing viewpoint, arguing that they “ignored” warnings about the damage it would inflict.

“Here we have one more Tory calling for the abolition of a policy that they voted in themselves, against unanimous opposition, only three years ago,” he says.

“They were warned about the damage that the new version of IR35 would inflict, but those warnings were ignored as the legislation, proposed by Treasury and HMRC, was blindly waived through Parliament by Conservative MPs who’d been subjected to a 3-line whip.”

Chaplin adds that, in light of fresh economic data showing that the UK has shown no growth in three months, the Prime Minister must “eat some humble pie” and accept that Liz Truss’ move to repeal the off-payroll legislation was correct.

While also concurring with the views expressed in the conservativehome article, Julia Kermode, CEO of umbrella company compliance specialist PayePass, argues that Buckland failed to address the “proliferation of non-compliant tax avoidance schemes” sparked by IR35.

“These dodgy operators saw an opportunity to advertise their services to firms that transferred contractors onto the payroll as a result of the reform,” she said.

“This government – and whichever political party wins the next general election – must take swift action to stop these firms, which result in massive tax avoidance.”