In the run-up to the election, chancellor Sajid Javid committed to launch a review into IR35 and the new rules coming into effect on April 6 2020; this review has since launched from January 6 2020.
Since coming into fruition, the IR35 reform has caused outrage across the self-employed community and amongst the businesses who hire them. According to a report from the FC Advisor, the changes will increase the amount businesses need to spend on hiring contractors by 14%.
The aim of the current review is to collate information from those who are affected by the new rules in order to address any concerns and ensure that the transition runs as smoothly as possible. Javid confirmed that his concerns lay heavily with the self-employed individuals affected.
It was hoped by many of those affected by the changes that the review could trigger a repeal IR35.
“Disappointingly hasty and inadequate”
Regrettably, the timing of this review has been called into question. Andy Chamberlain, deputy director of policy at IPSE (the Association of Independent Professionals and the Self-Employed) announced that:
“The review announced today is disappointingly hasty and inadequate.
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.”
Many leading figures in the contracting industry believe that the time allocated to the review simply isn’t sufficient to look deeply enough into the issues and implement any changes.
Changing the face of contracting and freelance
Already, companies in the private sector have made changes to their workforce, telling many they need to continue through an umbrella company or become a permanent employee if they want to remain in their contract. This has meant significant pay reductions for thousands of contractors while many others have chosen to walk away from the contract. It appears that despite the review taking place, businesses seem hasty to take the chance on a repeal.
Affecting the wider industry
While the purpose of the IR35 reform is to target those who are working like employees, Seb Maley, chief executive of IR35 specialist Qdos, believes:
The HMRC is still under the illusion that IR35 reform only affects those ‘working like employees’ also shows just how out of touch the government is with regards to the true impact of the changes.
The government also claim those who don’t comply with IR35 pay significantly less income tax and NICs than an equivalent employee.
This is misleading. HMRC must stop painting the picture that it is the worker dodging tax.
The final nail
Seb’s final advice to all those hoping for a last-minute repeal is as follows:
“Businesses, contractors and recruiters should take today’s announcement as solid confirmation that the legislation will be coming into effect this April, as planned.
The wording of the [Treasury] statement clearly indicates that there will be no last-minute policy U-turn. Anyone who has not taken the necessary action to prepare yet should do so now.”
If you’re concerned about how the impending IR35 reform will affect you, whether you’re a self-employed contractor/freelancer or a business relying on contracted staff, you can consult HMRC’s latest briefing. Following significant changes to your business model or employment status, you may likely need to review your insurance. For a free no-obligation review of your existing cover call us on 01892 511 144.