Boris Johnson and Sajid Javid urged to 'repeal silly IR35 tax'

A group representing UK contractors has written to Boris Johnson and Sajid Javid to hold them to account over commitments they both made on IR35 and Loan Charge 2019.

ContractorUK, backed by ten other outfits from the contractor industry, cited new Prime Minister Boris Johnson’s comments in June that the Loan Charge needs a “proper independent review”, as well as Chancellor Javid’s pledge in 2009 that the Conservatives would “repeal the silly IR35 tax” and called on both to back up their stances with action.

The letter, supported by FPB, PRISM and FreelanceUK.com, which urges No.10 and No.11 to investigate HMRC, says: “As organisations who either represent contractors and freelancers, or who operate in this sector, [we] are urging you both, as the new First Lord of the Treasury and the new Chancellor of the Exchequer to stop your predecessors’ war on contracting.

“To do this, we urge you to stick to your clear commitments made and restore the trust of contractors.

“[So] change course and announce, as a matter of urgency, that you will suspend the Loan Charge…[and] announce that the government will remove the roll-out of the Off-Payroll Tax from the draft Finance Bill.”

Calls to investigate Loan Charge and IR35

Calls for investigation are also backed by others in the contractor sector, such as Contractor Calculator and Professional Passport, follow the Economic Affair’s Committee in the House of Lords describing HMRC as “out of control”, and the letter asserts that policies introduced by the Treasury in 2015 have undermined the sector.

Signatory Anthony Sherick, ContractorUK’s director said: “Contracting allows workers to gain skills across many environments and transfer these skills within the private and public sector. This should not be undermined at all – yet unbelievably measures introduced by the previous chancellor will do just that, particularly the IR35 reforms.

“I hope the new Conservative leadership understands the requirement for a flexible and skilled workforce to help fuel the opportunities for economic growth. The new optimistic prime minister wants to focus on positivity and growing the UK economy and the benefits which the flexible workforce offers the UK is fundamental to this.”

The group argues that at a time when the growth of Business in the UK is so important, it is fundamental that the UK remains an attractive place to start and operate a business.

Julia Kermode, the chief executive of the Freelancer & Contractor Services Association (FCSA), said: “With Brexit coming, potentially without a deal, it is critical that the UK remains an attractive place to do business.”

Addressing Johnson and Javid, she said: “You can achieve this by making the simple decision to halt the Off-Payroll Tax reforms.”

Threat to livelihood

Sherick added that Johnson and Javid not only have the opportunity to help businesses and the economy grow, but also to save lives, saying: “With a change of the leadership of the government, we must now see a change of heart and urgent action to demonstrate this. Philip Hammond’s war on contracting has not only damaged business, but it has ruined lives.”

Echoing this, the BBC reported this week that the Loan Charge played a part a man’s suicide, resulting in his daughter also urging the suspension of the policy, saying that her father believed he was a criminal and had become obsessed with his tax affairs relating to the Loan Charge.

Tens of thousands of freelancers and contractors are facing a deadline at the end of August to agree with HMRC a “voluntary” payment for tax that goes back to 1999.

In failing to do so, contractors have been told they will have to add up all loans they have received in the last 20 years and pay the Loan Charge, with tax rates of up to 45%, by the end of January.

A group of MPs from all parties have warned that this could bankrupt many, and force others to sell their homes. Concerns for contractors’ mental health have also been raised by the group of 151 MPs, who have joined an All-Party Parliamentary Group (APPG), while more than 200 MPs have called for a suspension and independent review of the policy.

In response, HMRC said: “Our message to anyone concerned about a tax bill is to please come and talk to us and we will help.

“We know that facing a large tax bill can be stressful, and our teams will make sure that anyone who needs extra help receives support from a named contact who is trained to support people who are anxious or stressed.”

HMRC estimates that around 50,000 people were involved in a scheme that saw freelancers paid via a loan from an offshore trust, which it has described since 2010 as “disguised remuneration”, where the agency employing a contractor or freelancer diverts more of their pay to an offshore trust, which then gives them a loan which they typically don’t have to pay back, and which tax is only payable at around 1-2%.