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New Chancellor urged to halt IR35 reform

Chancellor under immediate pressure to stop IR35 changes 

The new Chancellor of the Exchequer, Rishi Sunak, has been welcomed into his role by IR35 specialists who immediately advised him to stop the roll-out of IR35 reform on 6th April.

Having succeeded Sajid Javid, who unexpectedly resigned last week as part of the cabinet reshuffle, Mr Sunak has taken up his new position with less than a month until the Budget on 11th March.

With the final IR35 legislation expected to be published on this date, sector experts were quick to call on the Chancellor to halt further changes to the legislation which will see contractors lose the right to set their own IR35 status in the private sector unless they are engaged by a ‘small’ company.   

Sunak must succeed where Javid failed

Last month, the previous Chancellor, Sajid Javid, was heavily criticised for launching what was described as an “inadequate” IR35 review. Upon being appointed as Mr Javid’s successor, Mr Sunak was told to learn from his predecessor’s mistakes. Qdos CEO, Seb Maley said: “With IR35 reform rapidly approaching, it’s vital that Rishi Sunak succeeds where Sajid Javid failed. We urge the new Chancellor to act immediately and halt the introduction of needless and short-sighted changes to the off-payroll working rules.”

This was a sentiment that Tania Bowers, Legal Counsel at staffing body, APSCo, also shared: APSCo maintains that implementation should, at least, be delayed pending a further impact review and completion of an assessment on employment status.”

Chancellor must consider global implications 

The threat IR35 reform poses to UK contractors is one thing, but the wider impact of the changes must also be considered by the new Chancellor, explained APSCo’s Bowers: “The UK labour market is currently ranked fourth for competitiveness globally and is one of the best recognised in the world. However, the roll-out of IR35 in the private sector has the potential to not only impact those individuals who have the entrepreneurial spirit to assume the risks and burdens of self-employment, but also those sectors of the economy which rely most heavily on independent contractors, such as banking, pharmaceuticals and technology.” 

As Chief Secretary to the Treasury before his appointment as Chancellor, APSCo hope that “this fact will resonate” with Mr Sunak, “particularly given his strong background in business and finance.”

Preparations for IR35 reform must continue

Whether a new Chancellor marks fresh hope for a change of heart from the Government remains to be seen. Certainly, independent workers shouldn’t assume this will be the case, explained Qdos CEO, Maley: “Contractors and private sector firms cannot hang their hopes on a last-minute rethink, even if scrapping IR35 reform is the sensible thing to do. Businesses must work off the basis that changes will be enforced and should continue their preparations.”

With the findings from the Government’s IR35 review due to be published this month, the Chancellor is likely to face increasing pressure to delay the changes. Meanwhile, more than 300 protestors gathered outside Parliament last week as part of the Stop the off-payroll tax campaign.

By Contractor Weekly

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7 thoughts on “New Chancellor urged to halt IR35 reform”

  1. Sam

    Contractors are facing uncertainties. There is no clarification whatsoever in terms of policies going forward. Many clients have already implemented IR35 even though it hasn’t become a law. Many Contractors are closing down their limited companies fearing future policies could adversely impact them.

  2. Lee

    There’s a nuance of ‘global competitiveness’ that must be considered – and that’s exporting services to foreign customers.

    This is a source of new national wealth, and should be encouraged.

    I was surprised to hear IR35 could apply even when an overseas customer is outside of the remit of UK law, and labour restrictions prevent any possible chance of being considered an employee overseas.

    I work with US clients. I am not authorised to work in the US. I am not entitled to welfare, statutory holidays, or any employee provisions. I am outside of scope for all forms of insurance. I control my time, hours and supply my own equipment. Even I wanted to, I couldn’t be a US employee because I don’t have the required visa. A contractor is my only choice.

    In this clear-cut scenario, IR35 should be entirely off the table. More than that, the UK gov should actively incentivise exporting services. The UK has a huge tech talent pool that could form a significant % of GDP.

  3. John

    The Government need to recognise the folly of handing big corporations the power to set IR35 status. The irony is that IR35 was designed to weed out individuals trading as businesses when they were actually in PAYE positions but has wound up being a mechanism for large corporations to coerce service providers into providing services under the false pretense of a PAYE position whilst they evade VAT. It has basically facilitated massive VAT fraud by corporations.

  4. Bob Bagwell

    I work on HV substations on the National Grid, for companies such as Siemens and ABB along with another few thousand people. Our work takes us from the top of Scotland to the south coast and from the Pembroke coast to east Anglia. We use our own tools generally, we pay our own travel costs, we also pay for our own accommodation. The longest spent on any one job is usually no more than 6 months, some may be up to a year, some may be a matter of weeks. Surely this kind of working practice should put us outside IR35.
    The companies I’ve mentioned use subcontractors as it suits their programmes and workloads ie if there is no or little work they are not paying a workforce to be on gardening leave. The senior management on a site, would normally be a company man and the supervisors, fitters and wiremen would be contractors. As the work tails off so it is easier to lose manpower by finishing contractors and save money or move the manpower to another site where there is less work.
    I’ve tried using the IR35 CEST and the answer I got was, No Determination, yet others I know the answer is outside. It seems that CEST is in the same mode as the treasury, doesn’t know what it’s doing.. Can someone, somewhere make a decision PLEASE!!

  5. Phil the Pill

    HMRC also needs to do the math in a holistic way not just look at the perceived “loss of Employee & Employer NI” contributions. Increased profits in a company means increased CT, higher dividend payments means higher personal tax, greater disposable income means increased Vat revenue, or increased Stamp Duty on larger house purchases etc. Plus higher disposable income has a multiplier effect on the local micro economies and hence across the whole of the UK. Much needed over the next 10 years as we struggle to get ourselves out of the morass that is BREXIT.

  6. Bob

    Too late folks! Even if they were to reverse their decision today, the damage is already done.
    I hope HMRC come to regret it, going after the small legitimate businesses instead of the big multinationals…

  7. John morton

    IR35 is another IR scheme to feed the Gov’t.
    Wh0 designed the CEST test.
    It is deliberately designed to ignore all the variables that would take many contractors outside IR35, such as hirers being able to take you on a contract at only a few hours notice then dump you before the contract ends without further pay or recompense.
    In fact it is practically impossible NOT to fall inside IR35 by the CEST test method.

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