The UK’s would-be chancellor of the exchequer has promised to review the extension of IR35 to the private sector – if the Conservative Party wins the General Election on 12 December.
Sajid Javid told Radio 4’s Money Box election special:
One thing in particular I want to look at is the proposed changes to IR35, these are the tax rules that apply to many self-employed people, particularly those that work as consultants… I want to make sure that the proposed changes are right to take forward so we will be having a review of those proposals and changes as part of our wider self-employment review.
As presenter Paul Lewis noted, it would need to be a quick review because the changes come into force in April.
The Lib Dems and Scottish National Party have made similar promises. Labour’s small business secretary, Bill Esterson, initially promised his party would stop IR35 changes, but then said it would be merely “reviewed” should the party win the UK General Election in 10 days’ time.
Contractor organisations welcomed the news but warned that uncertainty remains a problem both for contractors and the organisations that hire them.
Qdos’s CEO Seb Maley said: “With the General Election nearly upon us, that the Chancellor has pledged to review IR35 reform will be welcomed by contractors who have understandably lost trust in this government.
“While a review of IR35 changes is certainly a sign of progress, reform is still set to be enforced in April 2020. As a result, contractors, recruitment agencies and private sector firms must work off the basis that it will be introduced until told otherwise.
“Given the Liberal Democrats have been praised by contractors for promising a review already, you are left to wonder if this is why the Chancellor has now decided to discuss the legislation. IR35 was, as you might have noticed, absent from the Conservative Party manifesto.
“Nonetheless, a potential review into IR35 reform shows the Government is listening at long last. However, any review must be genuine and not lip service simply to win the votes of independent workers, who could be crucial in the outcome of the general election.”
Andy Chamberlain, deputy director of policy at the Association of Independent Professionals and the Self-Employed (IPSE), said: “This will be welcome news to freelancers across the UK. When the changes to IR35 were introduced in the public sector, they not only stifled freelancers, but worsened staffing problems for the NHS and many other essential public sector bodies.
“Now, as April 2020 approaches, major banks and businesses – vital drivers of the UK economy – are starting to panic at the plans to extend the changes to the private sector. Some are even telling their contractors they must join as employees or stop working for them altogether. Out of fear of these changes, they are destroying their flexible workforce.
“To prevent further damage, the parties must fully commit to halting the April 2020 rollout. Freelancers and businesses must be reassured they will not be hit by these ill-conceived and hugely harmful tax changes in Spring.
“A review is a big step in the right direction, but it must also be a full, independent review that truly listens to freelancers and the businesses that rely on them.”
Richard Mort, a director at Edge Testing Solutions and an ex-contractor himself, said: “We have already seen client companies view IR35 as a key risk for their business both from a financial and resourcing perspective. A nervousness is noticeable when reviewing IR35 requirements for next year. Clients are also concerned that contractors or umbrella companies may increase their rates to compensate for loss of revenue.”
HMRC declined to comment. Last week the taxman weathered more criticism of its re-released Check Employment Status Tool, which is meant to help organisations decide whether they can continue to employ people under the changed IR35 rules or not. ®