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In April 2000 the then Labour Government introduced the ‘intermediaries legislation’, known as IR35. These provisions are intended to prevent tax avoidance by those supplying their services ‘through’ a personal service company in circumstances when they would have been taxed as an employee if they had provided their services directly.  There are long-running concerns about the impact of IR35 on freelancers using PSCs, but also about the effectiveness of the rules to prevent tax avoidance, in part because it is the responsibility of the PSC to ascertain if they fall under the scope of IR35 for any specific engagement, rather than the client.

In the 2016 Budget Government proposed that from April 2017 public sector bodies would have new duty to ensure any contractors that they took on were complying with IR35. Following consultation, in the Spring 2017 Budget the Government confirmed that this reform would proceed; provision to this effect was included in Finance Act 2017 (section 6 & schedule 1). 

In Autumn 2017 Budget the Government announced that it would consult in 2018 on the possibility of extending this reform to the private sector.  Following a consultation exercise over May to August 2018, in the 2018 Budget the Government confirmed that it would extend this change to private sector from April 2020 after further technical consultation. This second consultation – the subject of this debate – was launched on 5 March, and will close on 28 May.

On 12 March Ged Killen MP made an application to the Backbench Committee for a debate on these proposals (Backbench Business Committee, Representations: Backbench Debates, 12 March 2019 Q1). This briefing pack was prepared in advance of the debate, which was held on 4 April (HC Deb cc476-96WH).

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