The Chancellor of the Exchequer has pledged a review of IR35 as part of the Conservative party’s manifesto bid to support self-employed workers.
Speaking on the BBC Radio 4 programme Money Box, Sajid Javid said the party had promised a review of how the government could further help the self-employed, adding that “one thing in particular” he wanted to look at was the proposed changes to IR35.
IR35, which was introduced in 2000, is an anti-tax avoidance rule that applies to all contractors and freelancers who do not fall under HM Revenue & Customs’ definition of being self-employed.
From April 2020, every medium and large private sector business in the UK will become responsible for setting the tax status – or IR35 – of any contract worker they use, as a result of changes introduced in last year's budget.
Mr Javid said: “I want to make sure that the proposed changes are right to take forward.
“We’ve already said that we’re on the side of self-employed people. We will be having a review and I think it makes sense to include IR35 in that review.”
Other things the party would look at would be improving self-employed workers’ access to pensions and mortgages, Mr Javid added.
According to HM Treasury, the taxpayer could be missing out on up to £1.2bn a year by 2023 as a result of people getting the rules wrong, and incorrectly paying tax as if they were self-employed.
But tax experts have predicted IR35 could reduce a worker’s net income by up to 25 per cent, costing the typical limited company contractor thousands of pounds in additional income tax and NICs.
Just last month the Association of Independent Professionals and the Self-Employed called on the government to “pause” the incoming legislation as research revealed the extent of business anxiety around the shake up.
Chief executive of IR35 specialist Qdos, Seb Maley, said the review would be welcomed by contractors who had “understandably lost trust” in the government.
He added: “A potential review into IR35 reform shows the government is listening at long last.
“However, any review must be genuine and not lip service simply to win the votes of independent workers, who could be crucial in the outcome of the general election.”
A review of the IR35 changes was absent from both the Tory and Labour manifestos, but has featured in the Liberal Democrats’, SNP’s and Green Party pledges.
imogen.tew@ft.com
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