The new Chancellor of the Exchequer, Rishi Sunak, has promised that HMRC officials will not be “heavy handed for the first year” when enforcing unpopular IR35 reform.
Speaking at an event in Birmingham last weekend, Mr Sunak, who has not yet been in his role a month, said he has “spent time with HMRC to ensure they are not going to be at all heavy handed for the first year to give people time to adjust.”
Mr Sunak’s comments were made a week after hundreds of contractors protested outside parliament against the introduction of IR35 reform in the private sector. With pressure mounting on the Government to stop the roll-out of changes, which will see medium and large firms tasked with deciding IR35 status from 6th April, the Chancellor believes a ‘soft landing’, as it has been described, is “an appropriate and fair thing to do.”
While private sector businesses are likely to welcome the Chancellor’s pledge, IR35-lobbying body, IPSE, has said a “light touch” will not prevent the “immense damage” that reform could cause to contractors.
Andy Chamberlain, Deputy Director of Policy at the association, explained: “This is nowhere near good enough. Taking a light touch early on will not mitigate the immense damage the changes to IR35 are going to do to contractors, their clients and the wider economy. If the new Chancellor really wants to improve the situation, he must halt and fundamentally reassess this disastrous legislation.”
Mr Chamberlain also believes the fact that HMRC intends to give the changes a ‘soft landing’ suggests the Government understands how problematic the reform may be: “Perhaps they are beginning to notice that businesses across the UK are already blanket-assessing their contractors as ‘inside IR35’ or even scrapping their contractor workforce altogether.”
Meanwhile, Seb Maley, CEO of Qdos, advised all parties involved to take the Chancellor’s promise with “a pinch of salt.” He said: “HMRC has a history of policing IR35 aggressively and given the Government expects to raise significant revenue as a result of the reform, I’m doubtful as to whether a light touch is something HMRC is capable of.”
As a result, Mr Maley urged businesses to carry on preparing for IR35 reform undeterred by the Chancellor’s words, which incidentally “all-but rule out the possibility of a last-minute U-turn.”
It also isn’t clear what the Chancellor means specifically when he says that HMRC will not be “heavy handed.” However, APSCo’s Operations Director, Samantha Hurley did say that “a ‘soft landing’ sounds good, if this is a nod towards a period of three to six months in which companies will have time to adjust to the new rules and not be penalised.”
When discussing the IR35 changes, the Chancellor also alluded to the “tweaks and improvements” that will be introduced to the legislation, to “make sure that the transition is as seamless as possible.” Any amendments to the incoming reform will be published on 11th March in the final legislation, with findings from the ongoing IR35 review expected to inform them.
This was well-received by APSCo’s Samantha Hurley, who was “encouraged by the Chancellor’s suggestion that we can expect some ‘tweaks and improvements’ to the implementation of the policy when the results of the current review are published.”