John Redwood, Conservative MP for Wokingham engaged in a parliamentary debate around tax and raised his concerns about the fall in numbers of self-employed people since 2019 and the impact of IR35 that has led to the decline of 800,000 self-employed workers and their importance to the economy.
He also mentioned those self-employed workers who want to grow their small businesses saying “If a self-employed person takes the giant bureaucratic step of taking on an employee or two, they will have all the bureaucracy and the extra tax that goes with that. We need to make it as easy as possible for them to grow their small business…”
Commenting on John Redwood’s support of the self-employed and his acknowledgement that IR35 has been damaging, Dave Chaplin, CEO of IR35 compliance firm IR35 Shield said, “John Redwood has made some very important points. The IR35 reforms have burdened genuine small businesses and undermined the entrepreneurial spirit that drives economic growth in our country.
“The purpose of IR35, let’s remind ourselves, was to “counter avoidance in the area of personal service provision,” with the Inland Revenue stating that “the proposed changes are aimed only at engagements with essential characteristics of employment.” The original IR35 press release from March 1999 also promised that: “a primary concern is to minimise any impact of these changes on ordinary businesses not involved in avoidance”.
“Small businesses, ordinary businesses, are the engine of the UK economy and are being punished by an unfair tax system. Just recently the long-running tax case between HMRC and IT consultancy RALC consulting was heard and remitted back to the First-tier Tribunal for re-examination. However, it has left RALC Consulting on the brink of insolvency and RALC ceased trading years ago due to the ongoing uncertainty of the IR35 status of contracts undertaken between 2010 and 2015 when Richard Alcock was managing his small consultancy.
“RALC is a shining example of how small businesses have been overlooked and punished by a tax system that is not fit for purpose. We need to modernise and improve our tax system and that means addressing taxpayer’s rights and HMRC’s abuses of power. HMRC acts with impunity and runs roughshod over honest self-employed workers. It needs a complete overhaul and needs to be held accountable. Currently, it can wield its powers unchecked and that is not right.
“As John Redwood points out, we have lost 800,000 self-employed workers because of IR35 and some, like Richard Alcock have been pushed to bankruptcy. The IR35 reforms do not work and are anti-growth. They need repealing and an alternative approach taken. Parliament must reconsider the IR35 reforms and their negative impact on entrepreneurship and economic growth in the UK as a matter of urgency.”
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