In a new statement highlighting the problems faced in the implementation of IR35, the Institute of Chartered Accountants in England and Wales (ICEAW) has called for an “informed national debate” on whether genuinely self-employed freelancers should be subject to reduced rates of tax and National Insurance Contributions (NICs).
According to the ICAEW, ongoing difficulties in imposing the IR35 reforms that were brought into force in 2017 for public sector organisations and 2021 for private sector firms, demonstrate that “fundamental” issues remain in how work is taxed.
In order to finally resolve these issues, the ICAEW’s Tax Faculty has called for the removal or restriction of incentives to arbitrage NICs and tax rates for employed or self-employed workers. The organisation claims this could be done by more closely aligning, or bringing level, the rates of NICs and tax paid by workers and firms or organisations engaging them for work.
Calling for an “informed national debate” on reduced NICs and tax for freelancers, the Tax Faculty says that due consideration has not been given to the issue, despite other reforms to wider employment rights in recent years.
According to the ICEAW’s Tax Faculty, having two different classifications for NICs and tax (employed and self-employed) is unsustainable when there are multiple employment classifications. To highlight the difficulties of determining a person’s employment status, it cites recent high-profile IR35 cases that have been taken to the Court of Appeal.
While the ICAEW concedes the complexity of such fundamental reforms to tax and NICs, it insists that it should be “considered holistically through informed discussion” and adds that IR35 and other such measures don’t fully address the problems in how work is taxed, while simultaneously burdening businesses.
The statement did, however, welcome the recent announcement that Matt Warman MP would lead a government review on the Future of Work in the UK, saying it trusts that the review “will seize the opportunity to consider how to resolve these fundamental problems.”
Author: Steven English