IR35

The Summer 2015 and March 2016 Budgets contained a number of measures that will affect tax requirements from contractors and individuals who work through their own company. These include changes to 'IR35' - also known as intermediaries legislation - tax on dividends, restrictions on travel and subsistence allowances, and off-payroll working for public sector workers. Concern has been raised that these changes may disproportionately affect the self-employed and those who own their own company.

As you may be aware, in the March 2016 Budget it was announced that from April 2017 the Government will make public sector bodies and agencies responsible for operating the tax rules that apply to off-payroll working in the public sector. The Government has stated that it believes there is evidence of widespread non-compliance with the legislation.

I understand that this measure is to be introduced in the Finance Bill 2017, and as these are complex changes, it will be important to properly assess and debate their potential impact on workers. I can assure you that the Bill will be properly scrutinised by my Shadow Frontbench colleagues when it is considered in the House of Commons. 

HM Revenue and Customs carried out a consultation, which closed on 18 August 2016, on reforming the intermediaries legislation to "improve effectiveness in the public sector". I know that a number of bodies - including the Freelancer & Contractor Services Association, and the Association of Independent Professionals and the Self Employed - made submissions and I believe it is important the Government carefully considers these, and the wider evidence that exists on this issue, before a decision is made. 

More widely, I believe there is a strong case for a review of the tax rules affecting flexible workers. It is time for the Government to commission a strategic review, in the hope that this will lead to clarity and a simpler tax system. The Office of Tax Simplification (OTS) would be one choice to conduct such a review.

It is important, in general, that our tax system treats everyone equally and fairly, whether large multibillion-pound corporations, small businesses or individuals. The Government should be on the side of the businesses that create decent jobs, pay their taxes, and bring a social value to their communities, including those who work, whether for themselves or as employees, providing goods and services.

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