Autumn Statement silent on IR35 reform but…
3.20 of the ‘Spending Review and Autumn Statement 2015’ document could provide us with a hint of what the Government has in store for IR35 even though it concerned the proposed removal of travel and subsistence tax relief for employment intermediaries. This stated, “As confirmed at Summer Budget 2015, the government will legislate to restrict tax relief for travel and subsistence expenses for workers engaged through an employment intermediary, such as an umbrella company or a personal service company. Following consultation, relief will be restricted for individuals working through personal service companies where the intermediaries legislation applies. This change will take effect from 6 April 2016.”
The consultation document on intermediaries travel and subsistence tax relief, which ran for 12 weeks and closed on 30th September 2015, proposed that where a contractor was subject to supervision, direction or control (SDC) then they would be prevented from claiming tax relief to expenses incurred in travelling to an end client site and also subsistence associated with those visits. The focus was therefore purely concentrated on one aspect of the control test and not on the entire tests of employment status.
We can therefore deduce one of two things from this statement:
1. Premediated decision
When the government talk about the intermediaries legislation in relation to travel and subsistence are they really referring to SDC? Bear in mind that the purpose of the consultation was to seek views on the detailed policy design and a framework for implementation of a specific proposal, rather than to seek views on alternative proposals. If this is the case, then is IR35 to be boiled down to the SDC test?
The IR35 discussion document promised us a full consultation which we may still get but it could simply be a cosmetic exercise. If the Government has already decided that IR35 is to be simplified to one test, then the consultation process will simply be a sham to placate all affected and interested parties. HMRC have form for this and have been criticised in the past for paying lip service to the whole process.
2. Take it at face value
The Government has had a change of heart and decided that simply applying the SDC test was rather unfair and have indeed widened the measuring stick to the whole range of the employment status tests. In which case, IR35’s future is still undecided and this is indeed what the IPSE are advocating. They claim that shortly after George Osborne finished his statement, senior officials confirmed that the Government is still considering its options on IR35 and will take more time in seeking a solution.
All things considered it does appear that we may be able to breathe a sigh of relief that the newspaper reports and rumours came to nought and its business as usual for IR35. Don’t get too comfortable though as there may be more rocky times ahead.
I can understand why so many firms are concerned with these proposed changes. The HMRC’s implementation of the law has been poor and it’s great to organisations like – https://www.ipse.co.uk/ are committed to working with the Government to create a tax environment that provides clarity, consistency and certainty for the UK’s freelancers.
I think we are naïve if we assume that the government is going to simplify this or any other tax law. With parliament filled with failed barristers, the government has no incentive to clarify anything as tax law has always been a job creation scheme for the legal profession. And the revenue evaded by parliamentarians has to be collected from somewhere, so we are all easy targets.