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Private sector organisations should continue preparing for the onset of the private sector IR35 reforms in April 2020, despite chancellor Sajid Javid’s pre-election pledge to review the proposed changes.
During an appearance on BBC Radio 4’s Money Box programme, Javid said the Conservative Party is committed to conducting a review into what the government could do to lend more support to the self-employed community, which would include a re-evaluation of the IR35 private sector reforms.
“We’ve already said that we’re on the side of self-employed people,” he said, during the show. “We will be having a review and it makes sense to include IR35 in that review.”
As things stand, from 6 April 2020, all medium-to-large private sector organisations will assume responsibility for determining if the contractors they engage with should be taxed in the same way as salaried workers (inside IR35) or as off-payroll staff (outside IR35).
At present, it is down to contractors to self-declare what side of the IR35 regulations the work they do places them, and the administrative burden this shift in responsibility will impose on companies has already prompted a number of firms to scale back their use of contractors accordingly.
As previously reported by Computer Weekly, the Conservative Party has found itself under pressure in recent weeks to confirm to match the pre-election pledges made by the Liberal Democrats, the Labour Party and The Scottish National Party to review the reforms.
While the Conservative Party’s newly announced commitment to a review has been warmly welcomed, private sector organisations are being warned off interpreting the move as a sign they can afford to slow down or put off preparing for changes.
This is particularly, as a review of IR35 was noticeably absent from the Conservative Party’s general election manifesto, noted Seb Maley, CEO of contractor tax consultancy Qdos.
“While a review of IR35 changes is certainly a sign of progress, reform is still set to be enforced in April 2020. As a result, contractors, recruitment agencies and private sector firms must work off the basis that it will be introduced until told otherwise,” said Maley.
“Given the Liberal Democrats have been praised by contractors for promising a review already, you are left to wonder if this is why the chancellor has now decided to discuss the legislation.”
Either way, the Conservative Party’s new-found commitment to reviewing the reforms is welcome and should be interpreted as a sign the government is heeding warnings about the de-stabilising impact the reforms could have on the economy.
“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,” he added.
There is also the fact that any review that does take place could conclude the changes should proceed as planned, which is why organisations should continue to prep for the April 2020 start-date.
On this point, Dave Chaplin, CEO Of IR35 consultancy ContractorCalculator and director of the 2,000-strong Stop The Off-Payroll Tax campaign group, told his LinkedIn followers to be wary of the Conservative Party pledge, that previous “reviews” by the party are what led to the proposed April 2020 reforms coming into being in the first place.
“[The word] ‘review’, of course, could mean nothing. And the veteran cynics among us who have seen the Tories promise twice before to ditch IR35, might think this won’t be third time lucky. They might be right,” he said.
The campaign group is now, Chaplin confirmed, writing to the chancellor to request a meeting to help inform his review, while also calling for a halt to the reforms coming into play so a thorough probe into the plans can take place.
The Association of Independent Professionals and the Self-Employed (IPSE) is also calling for a similar postponement, and urging all political parties to commit to postponing the go-live date for the reforms, should they come to power on 13 December 2019.
“The parties must fully commit to halting the April 2020 roll-out. Freelancers and businesses must be reassured they will not be hit by these ill-conceived and hugely harmful tax changes in the spring,” said Andy Chamberlain, deputy director of policy at IPSE.
“A review is a big step in the right direction, but it must also be a full, independent review that truly listens to freelancers and the businesses that rely on them.”
Read more about IR35
- Lloyds Banking Group is to phase out its use of contractors that engage with the firm via personal service companies in preparation for the IR35 tax reforms being extended to the private sector, Computer Weekly has learned.
- Barclays is understood to have notified line managers via email on 30 September 2019 of its plans to phase out use of limited company contractors, ahead of the IR35 private sector reforms coming into force in April 2020.
- GSK contractors that have received “scaremongering” letters from HMRC, urging them to review their engagements with the company from an IR35 perspective, are being urged not to panic, as the missives have no legal basis, claim experts.
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