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Take Sajid Javid's comments on IR35 UK contractor rules with a bucket of salt, warns tax guru

What now? A pre-election porky? Heaven forfend…

Conservative Party claims they may review the extension of IR35 tax rules to the UK private sector have been called into question by a tax expert.

Would-be Chancellor of the Exchequer Sajid Javid promised a review of the changes last week, in line with other parties. But observers have noted that there is no mention of this in the party's manifesto, making it an uncosted pledge that would leave a multibillion-pound hole in accounts should the party remain in power after the UK general election on 12 December.

City law firm Fieldfisher ran a round table event this week to discuss what companies could do to get ready for the changes.

Tax specialist Matthew Sharp, senior associate at Fieldfisher, said in a statement:

The draft of the Finance Bill 2019 is working its way through Parliament, so there could still be changes to the IR35 provisions before the bill comes into force (which is, as things stand, still anticipated to be April 2020).

However, the legislation is not controversial, and there is general consensus that exploitation of personal service companies (PSCs) needs to be addressed, so it is unlikely that the proposals will be scrapped. HMRC also anticipates significantly increasing its tax receipts (c.£3.12 billion between 2020 and 2024) by reforming tax rules for off-payroll workers.

Sharp also pointed out that IR35 is not a new policy, having come into force for the public sector in 2017, meaning the upcoming changes would bring rules into alignment.

Seb Maley, Qdos CEO, also warned against putting too much faith in pre-election promises: "Nobody knows which party or parties will form the next government, so to an extent, political uncertainty could well delay or lead to the scrapping of IR35 reform.

"That said, it's worth remembering that the Conservative Party decided IR35 reform was necessary, while the Labour Party – which hasn't officially committed to an IR35 review – introduced the legislation back in 2000.

"The existing government also see IR35 compliance as an area in which they can raise tax revenues significantly, which is perhaps another reason to believe the Conservative Party is intent on introducing reform, despite promising to review the changes.

"At this stage, the likelihood is that IR35 reform will go ahead, even if a review does take place. Therefore, it's absolutely vital that private sector companies are in a position to fairly assess the IR35 status of contractors they engage well before April 2020."

Andy Chamberlain, deputy director of Policy at IPSE, said: "We are already seeing banks and other major companies panic-scrapping their contractors ahead of April. If parties truly seek to support and protect British business, they must turn this around.

"Only the Liberal Democrat manifesto committed to reviewing IR35.

"Now, we are calling on all parties to pledge they will not only review IR35, but also halt the 2020 roll-out while a full and independent assessment of the legislation is carried out. A thorough review of the changes in the public sector would show the huge damage they did and why they absolutely must not be extended to the private sector."

We've mailed the Conservative Party press office and will update this story if we hear anything. ®

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