Issues around IR35 rules have reared their head again after the Prime Minister unveiled his extensive plans for reinforcing the UK’s energy security.
“Sound” management of off-payroll working tax laws – which affect how firms use contractors -“hold the key” to delivering on Rishi Sunak’s ambitions, according to employment expert Qdos.
During the government’s ‘energy week’, the prime minister announced plans to dish out hundreds of new oil and gas licences in order to “max out” the North Sea’s resources.
Additionally he pledged long-awaited funds for two carbon capture and storage projects (CCS), including Acorn in Aberdeenshire.
© PASunak said the investment would improve the energy resilience, create jobs and generate tax revenue, while moving to net zero in a “proportionate and pragmatic” way.
His plans have been slammed by climate groups and NGOs, who say they fly in the face of the UK’s commitment to decarbonise.
Bodies needed to do the work
Leaving the environmental concerns to one side, the government says its plans will support 50,000 jobs, while protecting 200,000 others that rely on the North Sea oil and gas industry.
However the energy sector, like many others in the UK, has repeatedly stated that it is in the midst of a skills shortage that threatens to derail the transition.
A number of reasons have been posited, with several employment experts blaming the impact of private sector IR35 reforms for shrinking the pool of willing contractors.
Qdos chief executive Seb Maley, said: “Delivering the UK’s energy ambitions hinge on the sector’s ability to engage flexible workers. And if energy firms hope to seize these opportunities announced by the government, sound IR35 management holds the key.
“The energy industry is incredibly reliant on temporary workers, particularly during periods of growth, which the sector is gearing up for. But in recent years, after the introduction of the off-payroll working rules, far too many energy firms have been reluctant to engage contractors for fear of being hit with bills for non-compliance.
“It’s vital that energy businesses understand that the off-payroll rules, while complex and potentially costly, can in fact be managed with the right approach. Achieve this and businesses will be well-placed to reap the benefits of highly-skilled contractors in a cost-effective way.”
IR35 in the spotlight
Reforms to IR35 legislation – enforced by HMRC for the public sector in 2017, and private sector in 2021 – made businesses that engage contractors responsible for determining the status of said workers.
If the work they carried out is decided to reflect that of a regular employees, they are within IR35, and have to pay more tax.
Under the off-payroll working rules, businesses responsible for paying contractors are liable and risk large tax bills for non-compliance.
© Aaron Chown/PA WireAs a result many energy businesses adopted a safety first approach and implemented blanket rules, insisting that genuinely self-employed contractors operate on the payroll.
During his short spell as Chancellor Kwasi Kwarteng pledged to scrap the reforms, but his successor Jeremy Hunt quickly axed the move.
Since then a number of high profile Conservative figures have called on the government to revisit the issue.
A government spokesman said: “With or without the reforms, the underlying rules on off-payroll working are unchanged – anyone working like an employee should pay similar tax as someone who is directly employed.
“ Understanding the impact of the off-payroll working rules reform continues to be a priority for the Government and HMRC will continue to provide support and help to any individual or employer operating under the rules.”