Why Nigel Farage Wants to Get Rid of IR35
A Hot Topic in Contractor Circles
Hey there! Let’s make your workday a little easier by unpacking a subject that’s been lighting up headlines and contractor forums alike: Nigel Farage’s call to scrap IR35. As the Reform UK leader stirs debate ahead of the general election, many UK contractors are asking: What would repealing IR35 really mean for us?
What is IR35, and Why Does it Matter?
IR35, officially known as the off-payroll working rules, was introduced back in 2000. It aims to prevent workers who supply services via intermediaries, like personal service companies, from avoiding full PAYE taxation. In short, it targets so-called “disguised employees.”
Contractors often feel IR35 is a blunt instrument, ensnaring genuine self-employed professionals in complex and costly compliance. The rules have shifted over time, notably moving the onus for status determination from contractors to clients in the public sector (2017) and private sector (2021).
Farage’s Position: Why Scrap IR35?
Nigel Farage has positioned himself firmly against IR35. His argument is twofold:
Boosting Flexibility: Farage claims IR35 stifles entrepreneurial spirit and flexibility — hallmarks of Britain’s contractor workforce.
Promoting Fairness: He argues that the regulations unfairly penalise genuine freelancers, making it harder for them to find work and contribute to the economy.
In a recent statement, Farage declared: “The IR35 rules are an unnecessary burden on freelance workers and small businesses, suppressing growth and innovation.”
The Potential Benefits of Repealing IR35
Let’s break down the main upsides for contractors if IR35 were abolished:
Greater Autonomy: Contractors could regain control over their tax affairs, reducing administrative headaches.
Improved Take-Home Pay: Without the risk of being classified as an employee for tax purposes, many could see a boost in net income.
Lower Compliance Costs: Abolishing IR35 would simplify tax reporting, freeing up time and resources for actual work.
Increased Opportunities: Businesses might be more willing to hire contractors without fear of falling foul of complex regulations.
| Benefit | Description |
|---|---|
| Autonomy | More control over contracts and tax affairs |
| Higher Income Potential | No risk of “deemed employment” deductions |
| Simpler Administration | Less paperwork and compliance hassle |
| More Work Opportunities | Businesses less hesitant to engage contractors |
The Disadvantages: Not All Sunshine
However, Farage’s proposal isn’t without controversy. Critics highlight several drawbacks:
Tax Revenue Loss: IR35 is designed to prevent tax avoidance. Its removal could reduce HMRC’s income, potentially impacting public services.
Level Playing Field: Employees and contractors could be taxed differently for similar work, raising questions of fairness.
Potential for Abuse: Some fear a rise in disguised employment, with companies hiring through personal service companies to avoid employer National Insurance and benefits.
*As one tax expert put it: “The challenge is to balance fairness for contractors with the need to fund public services.”
What Should UK Contractors Do Now?
With the election looming, IR35 is firmly on the political agenda. While Farage’s stance resonates with many in the contracting community, it’s important to weigh both the freedoms and the fiscal responsibilities involved.
Keep informed, engage with professional bodies, and consider how potential changes could affect your business structure and tax planning. No matter the outcome, staying proactive is the best way to protect your interests.
Your Next Step
If you’re a UK contractor, now’s the time to review your current arrangements and keep a close eye on policy developments. Talk with a qualified accountant or tax adviser to ensure you’re well-positioned for any changes.
In the meantime, we’ll keep you updated on all things IR35 — so you can focus on what you do best: thriving as a contractor in the UK economy.
