Labour SME minister back-tracks over claims party will scrap IR35 reforms if it comes to power

Labour’s shadow small business minister, Bill Esterson, has back-tracked on comments he made earlier this week that suggested Labour would scrap an extension of the IR35 reforms to the private sector, if it won the General Election.

As previously reported by Computer Weekly, during an appearance at an event organised by the Association of Independent Professionals and the Self-Employed (IPSE), Esterson said Labour would halt the IR35 reforms being rolled out to the private sector, if it came to power on 13 December.

“We absolutely can’t see it rolled out into the private sector the way things are at the moment,” Esterson said during the event.

As things stand, from 6 April 2020, medium to large private sector firms will join public sector organisations in becoming responsible for determining whether the contractors they engage with should be taxed in the same way as permanent staff (inside IR35) or off-payroll employees (outside IR35).

This means anyone with an “inside IR35” designation will be liable to make national insurance contributions (NICs), as well as Pay As You Earn (PAYE) tax payments, in the same way that salaried workers do, but will not be eligible for sick pay, holiday or pension benefits.

In response to a follow-up question put to Esterson on Twitter about whether the line he took at the event is official party policy, he replied: “Absolutely.”

In response, IPSE issued a press release, commending Esterson and Labour on their pledge to halt the roll-out of the reforms. 

But Esterson has since deleted the tweet, and confirmed that Labour will undertake a review of the current plan to extend the IR35 reforms to the private sector should it come to power, but has not committed to scrapping the proposal.

Computer Weekly contacted the Labour Party press office for further clarification on Esterson’s comments, and its apparent plan to review the IR35 private sector extension, but no response was received at the time of publication.

A separate request for comment was also sent to IPSE to query its response to Esterson’s apparent back-tracking over the matter, but again no response was received at the time of publication.  

The Labour Party’s election manifesto makes no explicit reference to the IR35 regulations, but does see the party pledge to embark on what it calls “the biggest ever crackdown on tax avoidance”, which is what the IR35 legislation is designed to address within the contracting sector.

It also states that Labour is committed to ending “bogus self-employment and creating a single status of ‘worker’ for everyone apart from those genuinely self-employed in business on their own account”, the document says.

Even so, Computer Weekly understands that Labour has privately indicated a preference for bringing the private sector into line with the public sector, as far as the IR35 rules are concerned, and has no plans to apply its terms retrospectively.