IR35 Review 2020 - A Government keeping their election promise
[Presenter] What else are you doing for self-employed people? They’re a growing part of the economy, and yet they often feel neglected.
[Sajid] In our manifesto, we have promised a review of how we can further help the self-employed. For example, things like pensions or access to mortgages. One thing in particular that I want to look at again are the proposed changes to IR35, and these are the tax rules that apply to a lot of self-employed. Not all but many, particularly those that work as consultants. I value the work of consultants, and I want to make sure that the proposed changes are right to take forward - so we will be having a review of those proposed changes as part of our wider self-employment review.
[Presenter] So these are the changes that will come-in in April 2020; you might put them off?
[Sajid] Well, this is a review, and I don’t want to pre-empt the review.
[Presenter] It will need to be a quick review…
[Sajid] We’ve already said in our manifesto, we made it very clear that we’re on the side of self-employed people and we will be having a review, and I think it makes sense to include the proposed IR35 changes in that review. (listen in full here)
This interview sparked the interest of freelancers throughout the UK’s private sector; offering a slither of hope at the end of 2019 that the wildly unpopular changes to IR35 legislation could be delayed… or even cancelled altogether.
However, as January draws to a close and with the Government’s IR35 review in full-swing, it’s safe to say that changes to the off-payroll working rules will be going ahead as planned, on April 6th 2020. In this article, we explore the review and what’s happened since the election.
Keeping their election campaign promise, on January 7th 2020 the newly elected Government launched a review of changes to off-payroll working rules.
Quoting HM Treasury’s published article on Gov.uk;
“The review will determine if any further steps can be taken to ensure the smooth and successful implementation of the reforms, which are due to come into force in April 2020. As part of this, the review will also assess whether any additional support is needed to ensure that the self-employed, who are not in scope of the rules, are not impacted.” - full release here.
It’s essential at this point that we consider the language and exact phrasing used in both the pre-election radio interview and the HMRC article. In December Sajid Javid wanted to “make sure that the proposed changes are right to take forward”, implying the review would consider all possibilities for the legislative change, including a stop on its rollout.
Just one month later the Governments message about the review was very different, with Financial Secretary to the Treasury Jesse Norman stating outright that “the purpose of this consultation is to make sure that the implementation of these changes in April is as smooth as possible”.
This Gov.uk publication confirmed to the UK’s self-employed communities that (excepting any yet-undisclosed anomalies), the expansion of the off-payroll working rules into the private sector would be proceeding as intended - both insulting and disappointing contractors and industry experts concerned by IR35’s impact.
What’s more, while the Government wish to ensure ‘smooth and successful implementation’, the worry is that it’s all too little, too late - with just six weeks remaining until the publication of final legislation on March 11th, leaving minimal time to implement any improvements.
“Given the legislation applies to payments made on or after 6th April, which typically covers work carried out in March, there is very little time for the Government to make any improvements once the review has concluded in February.” - Seb Maley, CEO of Qdos Contractor
“This seems to be another meaningless review from a government who seems intent on bulldozing ahead with its plans anyway. 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.” - Julia Kermode, Chief Executive of The Freelancer & Contractor Services Association (FCSA)
What has happened since the review launched?
On January 17th, HMRC’s internal manual was updated to now include around seventy questions relating to employment status; including questions about worker engagement, contract details, payment arrangements and mutuality, for example.
Linked with the November 2019 CEST tool improvements (HMRC’s service for determining tax status), the latest update will prove helpful when attempting to understand which questions should be asked when making inside/outside status assessments.
HMRC have previously stated that they will stand by the result produced by the CEST tool (provided the information input is accurate and the tool is used in accordance with HMRC guidance). Although the consistency of accurate results provided by the tool has been in constant question since it’s original creation in 2017, at this time it’s the only Government recognised tool available.
In addition to this manual update, a factsheet for contractors has been released - download.
Vague. Pointless. Nothing new. The factsheet hasn’t been received well by contractors or companies, adding to the negativity surrounding this review process. The main issue is that the Government’s focus is on implementation only, ignoring the changes themselves - leaving companies without the education and resources needed to make off-payroll status decisions for every one of their engagements.
(Read more in contractoruk.com’s IR35 factsheet write-up at link).
The Government is now in the process of meeting with key stakeholders across the UK (despite a letter from The Recruitment & Employment Confederation (REC) and 14 leaders from Reed, Adecco, Harvey Nash, Hays and more calling on the Chancellor to delay IR35). As such, we expect to receive more updates from HMRC in the weeks to come, but the fact will remain:
April 6th 2020, legislative IR35 changes will extend to the private sector - seeing end-clients become responsible for the inside/outside tax status of contractors they engage.
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