Off Payroll: House of Lords debate and latest ruling highlight complexities

The Court of Appeal’s decision on the IR35 case of HMRC v Antholl House Productions Limited has revealed that the complexities of Off Payroll legislation and the need for a clear definition of employment for tax purposes are having a detrimental impact on the UK’s labour market. That’s according the to Association of Professional Staffing Companies (APSCo).

APSCo also highlighted that the key downfalls of IR35 and why it isn’t fit for purpose - which were raised in a debate on the report from the Economic Affairs Committee, ‘Off-Payroll working: treating people fairly’ in the House of Lords – demonstrate the need for clearer and fairer processes.

Tania Bowers, Global Public Policy Director at the Association of Professional Staffing Companies (APSCo) commented:

The Court of Appeal’s ruling in the HMRC v Anthill case has highlighted just how complex the Off Payroll reforms are. While it is now with the lower tribunal for review, this latest news demonstrates the flaws that status determinations are open to under the existing legislation. This is another example of case law that will impact employment status definitions and it highlights why elements such as the degree of control – even if it’s found to exist – cannot be solely relied on for a determination. The need to obtain information on multiple facets of a placement to determine if it falls inside or outside IR35 is crucial in order to paint a more accurate picture of employment status. 

While this ruling itself adds further scope for determination arguments, the greatest concern is around the legislation itself and the effect it is having on the UK’s labour market and economic growth. As was made clear in the House of Lords debate, it is difficult to define the impact of Covid, Brexit and Off Payroll separately, however there is no evidence that IR35 is supporting growth. The suggestion in the debate that Off Payroll has driven up tax avoidance highlights that the legislation in its current format isn’t fit for purpose. The report from the Economics Affairs Committee stated that the approach to Off Payroll should be certain, simple, supportive of growth, administratively straight forward, enforceable and fair. It is our view that the reforms do not meet these criteria.

We agree that the need to commit to a date to create a Single Enforcement Body (SEB) is needed urgently and the fact that the Employment Bill is unlikely to be mentioned in the Queen’s Speech is a real concern. The need to properly define employment for tax purposes is also critical and, as was echoed by the debate, action is needed sooner rather than later if the UK is to create a labour market that is fit for purpose in the modern world. APSCo will continue to lobby government and work with the IR35 Forum to drive the changes that are needed.