IR35: Tory MPs write to Chancellor

Two conservative MPs have written to Chancellor of Exchequer Sajid Javid, urging for a review into IR35 to “commence immediately”, before the new rules come into play.

In his letter to Javid, MP for Wokingham John Redwood said that many of his constituents had expressed concerns before and during the recent election about the implementation of changes to IR35 that are due to come into effect on the 6 April 2020.

Scottish Conservative and Unionist Party politician Andrew Bowie, MP for West Aberdeenshire and Kincardine, used his letter to remind Javid of a pledge he made on BBC Radio 4’s money box to have a review into proposed tax rule changes for the self-employed, which Javid said should also include IR35.

Redwood wrote: “While I welcome the Government’s commitment to hold a review this would need to commence immediately before the new off-payroll working rules come into effect and potentially become a dampener on enterprise and undermine the self-employed. The self-employed are crucial to our prosperity and we should to do [sic] all we can to support them.”

He also warned that there was a danger of losing business overseas as contractors opt to take their services elsewhere, which is becoming increasingly possible with new technology and remote working.

The proposed changes – originally introduced in the private sector – would mean that private businesses are responsible for setting the tax status of any contractor they use. This has resulted in some large companies, such as Barclays and GlaxoSmithKline, imposing a blanket ban of off-payroll workers.

Many fear that this same approach could be taken by more organisations which do not want the administrative headache of determining the employment status of all contractors that they use.

Bowie wrote: “If the proposed changes – making every medium and large sector private business responsible for setting the tax status of any contractor they use, were to come into effect, I would worry for the industry and its ability to attract the highly skilled workers they need. It is also predicted that changes could see a workers income reduced by up to 25%. Many of these workers are my constituents.”

Both MPs have urged Javid to either extend or suspend the 6 April 2020 deadline until a proper review of IR35 has been undertaken by the government.

Concern for accountants

As reported by Accountancy Age in November, some accountants are saying that their private sector clients are choosing to go PAYE ahead of the 2020 deadline, and therefore no longer require their services, such completing VAT returns.

It is difficult to pinpoint just how many contractors have opted for PAYE as a result of IR35, but it could become a growing problem in the run-up to the deadline, something which has already been seen in the public sector.

Speaking in November, Ily Maisanda, CEO of Maisanda & Co Accountants in west London, said he lost some of his clients as they went full-time in sectors such as the NHS.

“Many of those that had their own companies were essentially NHS employees who did not want to be tied down, they needed some extra free time. Because if you have your own company, you can manage your life. If you are a full-time employee, especially in the NHS, they will dictate to you when you should go for your holiday, among other things, and all for less pay.”

Accountants may well be asked by their clients what the best approach is to avoid falling foul of IR35 rules. One suggestion should be to diversify, as HMRC are targeting contractors who are employees in all but name.

By diversifying a client base, a person is less likely to be investigated by HMRC for not being a ‘true’ contractor, as it should demonstrate that they are rightly deemed self-employed by the tax authority.

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