The government response to the report from the Economic Affairs Finance Bill Sub-Committee on off-payroll working

16 July 2020

The Government has published its response to the report from the Economic Affairs Finance Bill Sub-Committee on off-payroll working. The response focuses on the variety of concerns put forward by the Sub-Committee and confirms how the government is responding to the recommendations that were provided.

When the report from the Economic Affairs Finance Bill Sub-Committee on off-payroll working was initially published, Lord Forsyth of Drumlean, who was the Chair of the Sub-Committee, said:

"The Committee welcomed the Government's decision to defer these off-payroll working rules in the wake of the Covid-19 pandemic.

However, our inquiry found these rules to be riddled with problems, unfairnesses, and unintended consequences. The potential impact of the rules on the wider labour market, particularly the gig economy, has been overlooked by the Government. It must devote time to analysing all of this. A wholesale reform of IR35 is required.

The rules were deferred for a year because of the current crisis, but how prepared will businesses recovering from the crisis be to take on this extra burden on next year? The Government needs to think this through very carefully. We call on the Government to announce in six months' time whether it will go ahead with reintroducing these proposals.

Contractors already concerned by these uncertain times now have the added worries of paying more employment taxes and having their fees cut by clients making additional National Insurance Contributions. Also concerning is the number of companies getting rid of contractors in anticipation of the implementation of these new rules."

In the response to the report, recommendations are grouped into eight main categories which are:

  • Delay in announcing the introduction of the reform in April 2021 until October 2020, when COVID-19 impacts may be clearer
  • Employment rights
  • Independent review into the implementation of the public sector reform
  • Market impacts and blanket assessments
  • Education and support, including the Check Employment Status for Tax (CEST) tool
  • Potential cost to business of the new rules
  • Umbrella companies
  • Alternatives to the off-payroll working rules

The government responds to each area of recommendation, and concludes the response to the Sub-Committee’s report by stating:

“The Government has carefully considered the Sub-Committee’s report into the off-payroll working rules. Whilst the Government is still committed to introducing the reform to these rules in this Finance Bill, with an implementation date of 6 April 2021, it agrees with the Sub-Committee that the delay should be used productively and effectively.

The Government has already committed to commissioning further research into the public sector reform to assess how the reform had been implemented and its effect on the labour market. Furthermore, HMRC are enhancing its education and support to businesses and individuals ahead of the implementation of the reform in April 2021. HMRC will continue to engage with a wide range of stakeholders on the implementation of the reform, working with different sectors to ensure businesses understand the changes.

The Government would again like to thank the House of Lords Economic Affairs Finance Bill Sub-Committee for their inquiry into the off-payroll working rules.”

 


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