Fundamental change to IR35 ‘unlikely’ in Autumn Budget 

Tax increases and spending cuts expected at Autumn Budget, but IR35 unlikely to be addressed

Just weeks into his new role as Prime Minister, Rishi Sunak is already under pressure to deliver a financial plan that will help to combat the cost of living crisis and plug a £50bn black hole in the UK’s finances.

The government is also facing renewed calls to launch a review into IR35, after weeks of political instability have caused confusion and uncertainty for independent workers.

However, experts aren’t holding out much hope that IR35 will feature in the Autumn Budget, given that the government only rowed back on its promise to repeal IR35 reform on 17th October.

‘Substantial improvements’ needed, but not expected soon

Andy Chamberlalin, Policy Director at IPSE, is one of the voices calling for another review into IR35, but in his opinion the current political climate means that any review is unlikely at this stage. 

“We would like to see government build on its acknowledgment of the problems that IR35 is causing business”, he said.

“Having just U-turned on the IR35 repeal that meant less complexity and less cost, we know that immediate, fundamental change is unlikely. But the government should announce a review with the aim of making substantial improvements in the medium term”.

Additionally, John Cullinane – Director of Public Policy at the Chartered Institute of Taxation – has also called on HMRC to launch a review into IR35 and employment status, criticising the “tug of war over where responsibility lies for ensuring contractors and freelancers pay the right amount of tax”. 

He has suggested that a “strategic review” is needed, “to address the factors which make this so contentious”, calling the current application of the off-payroll working rules “undeniably problematic”. 

Government failing the self-employed

IPSE’s Chamberlain said the government was “spineless” and accused “the supposedly pro-business Conservative government” of failing to support the self-employed in IPSE’s reaction to the cancellation of IR35 reform repeal last month. 

He also said the move would be “a huge blow to thousands of self-employed contractors and the businesses they work with”.

Cullinane, of the Chartered Institute of Taxation echoed Chamberlain’s thoughts to a degree. He explained that while the planned repeal “would have reduced compliance burdens for big businesses” it would not have “solved the problem of IR35”.

“It would just have placed the burden of compliance back on small independent contractors and freelancers, leading to either widespread non-compliance, or to costly compliance activities for HMRC”, he said.

With a third fiscal announcement in as many months – the Medium Term Fiscal Plan is due to take place on the 17th November, after being rescheduled from the 31st October. 

Sunak will be in the spotlight and expected to deliver a workable set of plans that balance the needs of businesses and workers with the hole at the heart of government finances. But unfortunately for contractors, commentators expect IR35 to remain in its current form for the foreseeable future.