House of Lords IR35 Review
The House of Lords IR35 Review, and its recommendations, have almost totally been rejected by the Governement. It vows to keep IR35 and enforce it more. The House of Lords committee made a number of recommendations in its IR35 Review. These asked the Government to quantify the effect of IR35.
They called, in their IR35 review, for the Government effectively to do a Cost Benefit Analysis to see if IR35 brings in more than it costs. The Government has never produced such figures. Yet it has turned down the recommendation by the House of Lords IR35 Review to do so.
Umbrella Companies and IR35
The Conservatives, when in opposition, were against IR35. Whilst not quite promising to abolish it, they promised to review it. They did so and decided that they actually liked it and wanted to keep it. The reason that was given for keeping it is that there was a danger that contractors would dump their Umbrella Companies and head straight for Personal Service Companies. There would be a resultant loss of tax revenues for HMRC and the Treasury.
This was entirely predictable. In times when they are trying to cut the budget deficit the Government is hardly likely to hand people who earn hundreds of pounds a day big tax breaks which will save them thousands of pounds a year.
This IR35 Review never had a chance. This Government are even more gung-ho about IR35 than the Labour Government, who brought in IR35, were. Indeed, after the original IR35 Review, Chancellor, George Osborne, promised that the Government would STRENGHTEN IR35.
This must have come as a shock to the Professional Contractors Group (now IPSE). They put such store on a Conservative Government abolishing IR35.
As their rejection of this House of Lords IR35 Review shows, it’s not about fair play or about creating a good environment in which contractors can operate. It’s all about the money. Contractors are on the outside of those favoured by the Government.
Government Ministers Tax Avoidance
David Cameron’s father, Ian, made his money from offshore schemes and David Cameron got the benefit of that in his inheritance. George Osborne has an offshore family trust. David Cameron’s father-in-law Lord Astor is a major tax avoider as is the Conservative party’s main donor, Lord Ashcroft.
However, Limited Company contractors are on the outside of all of this. They are the ones that the Government want to squeeze. That is why they have rejected most of this IR35 Review.