Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what recent assessment he has made of the effect of IR35 on levels of employment.

The estimated Exchequer impact of extending the reform to the private sector has been certified by the independent Office for Budget Responsibility (OBR), and reflects an expected increase in compliance with the off-payroll working rules. The methodology and assumptions are aligned with those used to estimate the financial impact of implementing the reform in the public sector. The public sector reform is estimated to have increased overall Exchequer revenues by £250 million in the first 12 months.

The April 2021 private and voluntary sector reform does not introduce a new tax; the reform will improve compliance with existing rules by moving the responsibility for determining whether the off-payroll working rules apply from the individual’s company to the client engaging them.

The Government has not seen any evidence that indicates an overall change in demand for the services and skills that contractors offer. Many organisations will still choose to engage contractors using PSCs, where this suits their business model. Others may choose to change how they engage contractors who are working like employees. The Government will continue to monitor the effect of this reform on the labour market, including by commissioning independent research six months after the reform has taken effect. This research will be presented to Parliament.

Independent research on the impacts of the reform in the public sector showed that it did not reduce market flexibility or affect their use of contingent labour. Furthermore, at Budget 2018 the independent Office for Budget Responsibility did not judge the forthcoming reform to have any specific macroeconomic impacts.