HMRC's tough approach to IR35 has 'chilling effect' on economic activity, warns IPSE

01 Mar 2024

HMRC's tough approach to enforcing the IR35 rules is having a 'chilling effect' on legitimate economic activity, warns the Association of Independent Professionals and the Self-Employed (IPSE).

IPSE's warning comes after the tax authority was criticised by in a report by Parliament's Public Accounts Committee (PAC).

The report warns that HMRC's customer service levels have reached an 'all-time low'.

It also scrutinised issues around the IR35 rules on off-payroll working.

The PAC says it is concerned that HMRC's 'tough approach to tackling IR35 is deterring legitimate economic activity' and 'unnecessarily putting companies off using contractors'.

IPSE's Director of Policy, Andy Chamberlain, said: 'The PAC is absolutely right to highlight the chilling effect of IR35 on legitimate economic activity.

'HMRC has hounded individuals through the courts for years, often only to be proved wrong. This is making clients extremely reluctant to engage the freelance talent they need to deliver projects.

'If we really want to see a return to growth and engender a culture of economic confidence, we must harness the benefits of our flexible labour market, rather than stifling it with the unworkable off-payroll rules.'