The Association of Independent Professionals and the Self-Employed (IPSE) has warned that the changes to IR35 contractor legislation that were introduced earlier this year are the “forgotten factor driving the HGV crisis”.
It has argued that to resolve the crisis, government must therefore look not only at issues to do with post-Brexit regulations, but also the “chaos” left in the wake of the IR35 changes. IPSE has urged government to repeal the changes to IR35 – and at the very least investigate the unintended consequences of the changes.
IR35 legislation essentially allows HMRC to tax contractors as employees if it believes them to be in false self-employment. In 2017, government changed how this works in the public sector, shifting responsibility for determining IR35 status from contractors to their clients. In April this year – after delaying a year due to the pandemic – government extended these changes to the private sector.
Determining IR35 status is complex and left many clients fearing liability for incorrect judgements. The result was that clients ceased engaging contractors, would only engage them on an ‘inside-IR35’ basis, or engaged them through umbrella companies. IPSE research found 50% of contractors planned to stop working in the UK as a result.
A total of one in four (24%) said they planned to seek contracts abroad, one in eight (12%) said they would stop working altogether, 17 per cent planned to seek an employed role and 11 per cent said they would retire.
Andy Chamberlain, Director of Policy at IPSE, said: “The changes to IR35 are the forgotten factor driving the HGV crisis. The IR35 changes have already had numerous unintended consequences from freelancers losing work left, right and centre, to many being forced into unregulated – and too often unscrupulous – umbrella companies. Now we can add fuel and food shortages to the list.
“IR35 is evidently not the only factor involved, but as research from the Road Haulage Association has shown, it is a key factor for more than half of drivers who are leaving the industry. This cannot be overlooked. But sadly, as with so much else to do with contractors and the self-employed, that is exactly what government is doing yet again: overlooking this vital sector.
“Another key issue is that the April IR35 changes failed to tackle the question of disguised employment. If it is the case that these drivers should be employed by the haulage firms, then the IR35 legislation does nothing to address this. Working ‘inside IR35’ leaves drivers with the worst of both worlds: paying the premium of employment taxes without receiving any of the rights or protections employment should offer.
“If government really wants to resolve the HGV crisis and get food and fuel flowing again, it must address the IR35 factor. We’ve been fighting the changes to IR35 for many years now – and continue to urge government to repeal them. At the very least, government must turn its attention to the mess left in the wake of IR35. This crisis is just one unintended consequence of the changes, and unless government clears the confusion after the changes, there may be more to come.”