A bid to delay controversial reforms to the off-payroll working rules until April 2023 has been voted down by MPs, paving the way for the changes to arrive in the private sector next year.
The amendment tabled by David Davis MP, which called for the reform to be postponed until the 2023/24 tax year, was put to a vote after politicians spoke at length about the legislation at the Report Stage of the Finance Bill on Wednesday 1st July.
But despite 254 MPs supporting ‘Amendment 20’, 317 voted against it. Consequently, IR35 reform will land in the private sector on 6th April 2021. Medium and large companies will administer the rules from this date, with the party in charge of paying the contractor ‘the deemed employer’ bearing the responsibility for making the appropriate tax and national deductions before making payment to the Personal Service Company.
As the numbers show, Amendment 20 wasn’t overwhelmingly rejected. Strong lobbying against the introduction of the changes, from the Stop the Off-Payroll Tax campaign and IPSE, meant it was by no means a cut and dried decision.
Several MPs also spoke eloquently about the issue in Parliament on the evening of the vote, referencing the House of Lords investigation into IR35, which advised the government to address the legislation’s “inherent flaws” and recommending sensible alternatives to the reforms.
Zero-rights employment “a disaster”
David Davis has received widespread praise for the account he gave, having urged MPs to back the amendment and conduct a review, which he explained is needed to ensure the government understands “precisely what the effect of our new policy will be.”
The former Brexit secretary also said it would be “a disaster if, in the context of the economic crisis and the growing gig economy, the government accidentally created that class of zero-rights employees with no holidays, no sick pay, no pension, no redundancy - no employment rights whatsoever.”
Government advised to “go back to the drawing board”
Davis was joined by the SNP’s Alison Thewliss, in his criticism of the changes. She said the “Tories have failed” to address her Party’s concerns about IR35 and believes the government haven’t learned from the experience in the public sector. The MP for Glasgow Central then recommended that MPs vote to “pause this policy and go back to the drawing board” instead of “ploughing on regardless.”
But Tory whip proves decisive
While several other MPs expressed concerns about IR35, including acting Liberal Democrat leader, Sir Ed Davey, who was particularly animated, MP Ben Everitt’s speech also stood out.
The MP for Milton Keynes North described the changes as akin to using a “sledgehammer to crack a nut” and said “I wish it (IR35 reform) were not postponed, but were cancelled.”
Everitt gave the impression he understands fears held by independent professionals when he said contractors were “looking to the Treasury Bench for some hope, and some sign that they are not forgotten and that this Government recognise them as part of the solution to our economic woes, not part of the problem we face.”
But when it mattered most, he voted against the amendment. While it’s likely that he was instructed to do so by a Conservative whip, effectively voting in favour of IR35 reform so quickly after criticising it did not go unnoticed by contractors. Sir Ed Davey alluded to this and blasted MPs for “ignoring their constituents and doing what they were told to by government whips.”
You could say this sums up IR35 reform in a nutshell. Plenty of MPs seem to understand why people are so opposed to the changes, but for whatever reason they do not want to or cannot stop them from going ahead next year.
In the coming weeks the Finance Bill will be read for a third and final time, before being reviewed by the House of Lords. It is then ‘considered’ and progressed to ‘Royal Assent’, which is when the Queen formally approves the Bill.
However, realistically there are now no further opportunities to amend the 2021 implementation date, which means private sector companies should make preparing for off-payroll reform a top priority.
With you all the way
As always, we'll keep our news page updated with any further developments. Our IR35 resource hub also contains useful information for recruitment agencies, end hirers and contractors. If you have any queries regarding the reforms, please do not hesitate to contact us.