Naked in Westminster: Why ministers should ditch the new clothes of IR35

In a break from the naked ambition and just plain nudity in Westminster last week, IPSE’s policy team attended a very welcome Westminster Hall debate with the objective of adding IR35 to the items exposed then thrown out. The debate was called by Labour MP Ged Killen and responded to by the respected Economic Secretary to the Treasury, John Glen. It quickly became clear that Mr Killen was well briefed, because he pointed to the same problems with the public sector IR35 changes that IPSE has highlighted. He also, rightly, questioned the planned changes in the private sector next year.


It was counter intuitive to see nominally ‘big state’ MPs from Labour and the SNP arguing for more clarity and freedom from state intervention for entrepreneurs, while the ‘pro-business’ Conservative government seeks to extend the burden of tax and bureaucracy. Freed of treasury officials, these ministers would probably be on the other side of the fence, but we live in strange times.

Labour rising star Paul Sweeney alluded to this when he quoted the minister’s boss, Chancellor Philip Hammond, who said in 2001: “One reason why the Government’s IR35 initiative has been so damaging and destructive is the fact that it has hit at the most flexible part of the economy.”

That damage and destruction was the focus for MPs Ruth Cadbury and Susan Jones, who noted the extensive real-world impact of what is generally seen as a niche tax technicality. Their examples of NHS services and patients suffering because freelance medical professionals have fled from wrongful blanket assessments were very powerful. As the debate went on it was very clear that MPs had serious concerns about the idea of the deeply flawed changes to IR35 being extended.

The most obvious discomfort and shuffling of papers for Mr Glen’s treasury entourage came when the subject of lost court cases was broached. The recent high-profile loss to Lorraine Kelly has clearly rattled HMRC and more cases like this may force some movement. The minister was also unsettled by Mr Killen’s use of his personal experience of self-employment to battle the department’s claim that CEST is an effective tool.

Despite this, it feels unlikely the government will “unblock their ears” (which, SNP MP Drew Hendry pointed out, MPs have been asking them to do for three years). The minister did offer warm words and repeatedly pointed to the ongoing consultation, which IPSE is asking members to help with. There was a commitment to bring detailed proposals to align tax and employment rights frameworks this year, but this will be very little comfort to people and businesses that value true flexibility.

Sadly, the evidence is that the treasury is unwilling or unable to weave a fair tax system that is fit for the modern world. In the absence of new threads, officials are reliant on convincing their ‘emperor’ ministers – who must know something isn’t right – to keep putting on the ‘new clothes’ of IR35. This leaves them, freelancers, our public services and the UK economy dangerously exposed out in the cold.

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James McLarin