Westminster’s U-turn on plans to roll back loathed off-payroll working rules appears not to have had any impact on public coffers.
Financial secretary to the Treasury, Victoria Atkins, recently told the House of Commons that the policy backtrack around IR35 reforms “did not incur any additional costs”.
It is a claim that’s been disputed by an employment expert, who has highlighted the staff costs of the government’s flip-flopping.
One of the many U-turns
Like a number of pledges, plans to repeal IR35 reforms fell victim to the UK’s quickfire prime ministerial changes in 2022.
During Liz Truss’ short tenure in Number 10, Westminster pledged to scrap the rules in order to remove the “unnecessary complexity and costs” of using contractors.
Any joy was short lived though, and less than a month later – following Ms Truss’s departure – the reversal was reversed.
Having had the prospect of an end to the loathed rules snatched away, there was widespread fury, and even claims it could swing the next general election.
Now, the UK Government is claiming a single additional penny wasn’t spent on the gaffe.
Responding to a question from James Murray, Labour MP for Ealing North, about the cost to the public purse of “removing and reinstating IR35”, Ms Atkins said: “The Government did not incur any additional costs as a result of the announcement of the repeal and subsequent reinstatement of the off-payroll working rules.”
Claim ‘stretching credulity’
The claim has been met with disbelief by Dave Chaplin, chief executive of tax compliance firm IR35 Shield, who has challenged Ms Atkin on her comments.
He said: “It is stretching credulity to suggest there was no effort at all put in by all civil servants in relation to the repeal being announced and the subsequent 24 days in limbo before it was then cancelled. Are we seriously expected to believe that every civil servant on Government payroll did absolutely nothing?”
With dozens of contractors working in the North Sea at any one time, it’s unsurprising that that the energy sector felt the sharp end of the IR35 reforms particularly acutely.
The state of play
Rolled out in 2021, with a year’s delay due to Covid, the change in the rules means businesses are now responsible for assessing how freelancers are used.
If the job they perform is judged to be akin to that of a regular employee, or within IR35, they have to pay more tax – hefty fines are in place for non-compliance.
The main gripe with the reforms is that they are unnecessarily complex, and studies have shown a reduction in the use of contactors as a result.
At the same time the North Sea is crying out for more hands to deliver countless oil and gas and renewables projects.
Still those unaware of the U-turn
Mr Chaplin says the UK Government’s IR35 U-turn will also have hit many firms in their pockets, as well as fuelling further confusion about the reforms.
He added: “From the business perspective, the market paused, and the advisory ships required an about-turn. That cost money. And then, we had to turn it back again. That cost money.
“The repeal that never happened was massive news. There are still individuals and firms who think the repeal is still happening, who are now operating non-compliantly as a result.
“It’s no wonder confusion still exists because we also know how much was spent on Government communications. Zero. We know how much HMRC spent. Apparently zero. It’s not very responsible of Government is it?”