IR35 U-turn set to anger the recruitment sector

The new Chancellor Jeremy Hunt yesterday announced plans to reverse most of the tax measures announced in Kwasi Kwarteng’s mini growth budget 3 weeks ago.  

For the recruitment sector, the U-turn on the Governments plans to repeal the IR35 Off-Payroll Working Rules reforms of 2017 and 2021 has brought dismay to the industry.

There is no doubt that the UK economy is experiencing challenging times and tough decisions are required.  Reversing some of the tax cuts appear sensible but repealing the IR35 reform will not support the Governments objective of encouraging a growth economy.  It just succeeds in damaging the flexibility of the UK labour market and is a major blow to contractors and freelancers.

The supply of an agile and flexible workforce to cope with seasonal or business demands is essential. Over the last few years’, we have lost many contractors whether that be due to Covid, Brexit or the IR35 Reforms leaving the UK with a less flexible workforce.  The IR35 reform would have encouraged contractors back into the market and acted as a real spur for growth.

The reform brought increasing complexity to all contractors, recruitment agencies and businesses engaging contractors.  Ensuring everyone complies with this increasingly complex legislation is non-productive and hinders the growth plans of businesses

It is recognised that backtracking on the recent mini budget was required as the UK needs to pay back borrowings of recent years, but this feels like the wrong course of action which although expected to bring in £20bn of tax, at what cost to the growth of the economy?

We await the fiscal statement which is due to take place on 31 October with bated breath.  The UK, the recruitment sector and workers need the right environment from which to grow.

Terry Wolfendale

MD, Pulse Outsource