IR35 Tax Reforms

Susan Elan Jones Excerpts

Thursday 4th April 2019 Westminster Hall

[Susan Elan Jones (Clwyd South) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Gapes, and to follow my hon. Friends the Members for Rutherglen and Hamilton West (Ged Killen) and for Brentford and Isleworth (Ruth Cadbury).

From discussing the issue with constituents, trying to read up on it and coming here today, the thing that really strikes me is how complicated it is. It is clearly complicated for most of us, as well as for the people who have to deal with it on a day-to-day basis. Obviously, nobody likes tax loopholes. My hon. Friend the Member for Rutherglen and Hamilton West gave an example of one that is clearly unethical and wrong. What made me realise more about all this is that a lot of the people who are affected by this want flexible working relationships. They have to respond to peaks and troughs in their businesses, and we need a system that works for them.

My hon. Friend the Member for Rutherglen and Hamilton West brought up concerns about the implementation of IR35 legislation in the public sector, and raised the CBI’s concerns about its implementation in the private sector. He also mentioned the clarification that can be provided by the recommendations of the Taylor review. We would all welcome clarification on this issue. I do not know whether I speak for other hon. Members, but the more I tried to read about it, the more complicated it became.

I want to raise a couple of issues from my constituency, which have been raised by people who have to deal with the system and who have very real concerns. Let me refer to the case of Kaye Edwards from Acrefair. Kaye is a freelancer and runs a consultancy business in Liverpool that has secured assignments for many other freelancers during the last 10 years. She has serious concerns about the off-payroll IR35 tax legislation in the public sector, and believes it would dramatically damage the UK if it were extended to the private sector. She believes her personal assignments and her company will be severely impacted by the proposed legislation. She states that her company is small and struggled through the credit crunch. She is of the opinion that companies like hers helped to bolster the economy during that period and are now battling uncertainty, which is not helped by the issues surrounding Brexit.

Kaye believes that the administration and lack of clarity on off-payroll legislation will make it either very difficult or untenable to continue her business. She believes that there are real concerns about the responses from HMRC and the Treasury. I am drawn to think of what my hon. Friend the Member for Rutherglen and Hamilton West said about HMRC and its lack of success rate in the cases that have brought against it.

Kaye Edwards claims that there have been many recent surveys on what would happen if IR35 were applied to the private sector. She thinks the widespread theme is that UK businesses will be subject to major disruption on all fronts. Increasing costs, shrinking talent pools, reduced flexibility, and legal challenges to status assessments are among the hurdles that firms are expected to have to navigate. She is fearful that the costs of doing business will rise, and claims that any current and future projects that are already planned for, costed, in progress and/or are funded by investment will be affected. She is especially fearful of how this will affect people working in IT, and feels that it could make some projects on low margins unprofitable, leading to cancellations and job losses. She is someone who has to deal with the situation on a day-to-day basis.

I have heard from another constituent on this issue. He runs a small company that is trying to develop its supply chain. Owing to the nature of the business, my constituent engages only in contract work, which involves travelling across the country. As such, he claims expenses for travel, accommodation, food and so forth. HMRC allows contractors working in the private sector to claim back 5% of the income that is generated through a contract to offset the admin costs of running a business. However, my constituent says other expenses will not be claimable. He argues that recent changes to travel and subsistence allowance mean that the contractors working under the rules of IR35 will not be able to claim on everyday expenses, such as travel, hotels, meals and so on. He believes that HMRC will reclassify those earnings as liable to tax and national insurance contributions if they do not meet its test. My constituent claims that this is notoriously difficult to do; in many cases, contractors’ expenses will not meet the test, causing a significant loss of income.

I apologise for reading that word-for-word; with the complexities involved, I am rather fearful of not doing so. Can the Minister clarify some of those concerns? My constituents are committed to the business work that they do, and these sorts of workers are very important in my local area. However, they are clearly worried about the proposed changes. I hope the Minister reassures us in some way and deals with the situation—it is causing great concern to my constituents who are likely to be affected by it.