Hasty. Meaningless. Insult. Three words that leap out from the many that have been used in response to the government’s IR35 review news.
Chancellor Sajid Javid promised to look at the new off-payroll rules when he was campaigning in the election. So, on the face of it, it’s good that he’s sticking to his word.
The government says it wants to address the many concerns about IR35, which comes into force on April 6. But this time-frame is still in place, by the way. And the review looks like it’ll take until mid-February, well before the budget.
“The purpose of this consultation is to make sure that the implementation of these changes in April is as smooth as possible,” says Jesse Norman, financial secretary to the Treasury. The key word here is implementation.
Contractors and freelancers and the IR35 review
So IR35 is an anti tax avoidance rule that affects workers not covered by HMRC’s definition of being self-employed.
From April, private sector business will set the tax status of contractors they use, as with the public sector.
This could result in higher tax bills and NI for freelancers, without the ‘perks’ of employment, such as holiday pay.
Critics also say the new rules would increase a business’ contractor costs by up to 14 per cent. And they would limit the ‘tax freedom’ if being self-employed. Many big groups, such as Barclays, have said they are going to stop using contractors.
Bulldozing ahead with IR35 review
Freelancers and contractors who will be affected by IR35 are not happy.
“This seems to be another meaningless review from a government who seems intent on bulldozing ahead with its plans anyway,” says Julia Kermode, of the freelancer and contractor services association.
“They are expecting the review to be completed by mid-February which is simply not long enough to consider the deeply complex range of issues that the off-payroll legislation is throwing up.
“HMRC has stated that it will be continuing its preparations to roll out the reforms in April come what may.
Empty election promises
“The review will focus on the implementation of the reforms rather than the reforms themselves which is not what was suggested and is not what is needed.
“I fear that today’s pledge is simply the government paying lip-service to empty election promises and nothing short of an insult.”
“The review.. is disappointingly hasty and inadequate, ” says Andy Chamberlain, deputy director of policy at IPSE (the Association of Independent Professionals and the Self-Employed).
“Not only has the government not said it will pause the changes, it has also allocated far too little time for a full review and said nothing about selecting an independent chair. Such a limited review would leave the freelance sector floundering.
Disastrous changes
“Right now, across the sector, contractors and freelancers are panicking at the prospect of these disastrous changes. Major businesses, including most of the large banks, have already announced they will no longer engage contractors out of fear they will fall foul of the notoriously complex legislation.
“Even before the new rules take effect, they are precipitating a crisis among the self-employed.
“The government must urgently reconsider. It must give more time for a full review that includes an impact assessment of the changes in the public sector and the likely effects on the private sector. And for the integrity of the review, it must make sure it is independently chaired.
“During the election, Sajid Javid said the Conservatives were ‘on the side of the self-employed’. It must not be one of the first acts of this government to let this commitment slide.”
Hmmm, let’s see…
