The Chancellor’s promise that the taxman would not be “heavy handed” during the first year of the changes to off-payroll working rules has triggered fresh fury over the Treasury’s promised review of the matter.
Rishi Sunak, the chancellor of the exchequer, attempted to reassure businesses they would be given enough time to adjust to the changes, set to come into force on April 1 this year, at an event in Birmingham this weekend.
According to FTAdviser’s sister paper the Financial Times, Mr Sunak said he had spent time with HMRC to ensure the department would give people time to adjust to the rules throughout the first year.
But far from being reassured, campaigners have argued his comments show HM Treasury has little to no intention of making significant changes to the IR35 shake-up despite the ongoing backlash from the business and contractor community.
IR35, 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 is already the case in the public sector.
The controversy surrounding the changes prompted the former chancellor, Sajid Javid, to pledge a review of IR35 as part of the Conservative party’s manifesto in the lead up to the general election.
At the time Mr Javid said he wanted to make sure the proposed changes were “right to take forward” but when the Treasury announced the review last month, the industry branded the set up “hasty” and “meaningless”.
Dave Chaplin, chief executive of ContractorCalculator, said today: “Rishi Sunak has already made his first gaff by effectively announcing that the promised IR35 review is going to result in no changes at all, despite mounting evidence of the damage it is already causing businesses across the UK.
“We are seeing firms halt or delay their projects, moving them offshore, putting the self-employed out of work.”
James Poyser, chief executive of contractor accountants inniAccounts, agreed. He said: “If the Treasury is now acknowledging there is a risk following feedback from businesses, professional bodies and contractors then it needs to be bold and say it will provide the delay and properly engage with organisations and those affected.
“Until then, a soft landing means nothing because ultimately the legislation won't change.”
Tax specialist Qdos’s CEO, Seb Maley, said the comments “all but ruled out” the possibility of a last minute U-turn.
Businesses and contractors have fiercely opposed the changes to the rules, as they argue they would increase a business’ contractor costs by up to 14 per cent and reduce a worker’s net income by up to 25 per cent.
The Treasury's review will determine if any further steps could be taken to ensure the smooth implementation of the reforms, rather than whether the policy will go ahead.
A Treasury spokesperson said: “We recognise that this is a significant change for businesses, and as the Chancellor has said, HMRC wants to take a supportive approach to help businesses to apply the rules correctly going forwards.”
imogen.tew@ft.com
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