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Off-payroll Working

Question for Treasury

UIN 37377, tabled on 20 April 2020

To ask the Chancellor of the Exchequer, what recent assessment he has made of the effect of IR35 tax reforms on (a) the economy and (b) flexibility in the workforce.

Answered on

27 April 2020

The off-payroll working rules are designed to ensure that someone working like an employee, but through a company, pays similar levels of tax to other employees. It is fair that individuals who work in a similar way should pay broadly the same amount of tax. The rules do not apply to the self-employed or stop anyone working through their own company.

In January 2020, the Government launched a review into the implementation of the reform of the rules. The Government is aware that some organisations are considering whether PSCs are the best way to engage contractors who are working like employees. Businesses reported that where individuals had been moved onto payroll, this was a result of a review of the structure of their workforce.

However, the Government has not seen any evidence that this indicates an overall change in demand for the services and skills that contractors offer, but will continue to monitor impacts on the labour market. For contractors who would prefer to continue to use a PSC, many organisations will still choose to engage contractors in this way, where this suits their business model.

Independent research on the impacts of the reform in the public sector has suggested that it did not reduce market flexibility or affect the use of contingent labour.

At Budget 2018, the independent OBR did not judge the forthcoming reform to have any specific macroeconomic impacts. This was reiterated in the Tax Information and Impact Note (TIIN) published in July 2019, which sets out HMRC’s assessment of the impact of the reform to the off-payroll working rules. The TIIN can be found here:

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