Lords lay into HMRC, HMT, as coronavirus revives hopes of IR35 reform delay

The fieriest Lords’ off-payroll session yet with both visibly irate peers and a visibly shaken HMRC and HMT, is reviving the prospect of an IR35 reform delay, thanks to COVID-19.

Keeping those delay hopes on the table this evening, chancellor Rishi Sunak said the government “will review absolutely everything” as part of its response to the Coronavirus.

Quizzing Mr Sunak’s Treasury colleague Lindsey Whyte on Monday, off-payroll inquiry chair Lord Forsyth asked if delaying the rules due to the “catastrophic” virus was “sensible.”

'Very damaging'

Further pressing HMT’s director of personal tax on a six or 12-month reform delay (she kept answering his question by telling him what was in the Budget), the Tory peer said:

“I’m asking you if you might put in place a measure which is not to go ahead with the measure…[as] evidence indicates it will have a very damaging effect on…contractors.”

Dissatisfied with Ms Whyte’s repetition (“As I said…,”), he added: “I know what was said in the Budget...

“Perhaps it might be a good idea [for you] to suggest to ministers that if their words mean what they are meant to mean, that it might be sensible to suspend the implementation of this change because of the impact which it will have on those businesses.

“What has been proposed in the Budget, I think, is generally acknowledged to be inadequate in terms of the scale of the [coronavirus] crisis. And it does seem rather perverse to add an additional burden of this kind on business that could easily be deferred for six or 12 months.”

'How does it ease the burden?'

Breaking off his own questioning, potentially in the hope that a sip of water would stop his frustration from boiling over, Lord Forsyth deferred to Lord Bridges. And he kept up the attack.

“The chancellor’s words [at Budget 2020 in relation to coronavirus] were that he wanted to ‘ease the burden on business.’

"How does this ease the burden on business – pressing ahead?”, asked the Tory peer, who twice quoted from ContractorUK's Budget coverage to tell the officials how experts are reacting to the all-clear for the reforms.

A near five-second delay before Ms Whyte could muster up an answer did not give her HMRC colleague, Cerys McDonald, enough time to stop her own reply from running into trouble.

“We are holding one-to-one calls with every large business to talk them through…[IR35 reform]”, the HMRC official said, only for Lord Bridges to probe: “Is that a good use of their time, in a [health] crisis like this?”

'You're havings those calls now?'

A quick clarification by Ms McDonald -- that the calls are not mandatory -- only seemed to provoke the Conservative peer.

“You’re having those calls now?” he asked.

“We are” she said.

“Is that a good use of their time -- in a [health] crisis like this?”

Cutting off her answer, Lord Bridges then said he’d ask the Treasury’s Ms Whyte instead, probing:

“Is that what we mean by 'easing the burden on business;' people having conversations with HMRC?"

'Maybe I'm thick'

Trying to convey the same concerns to both tax officials, Lord Forsyth (who doubted he was getting through to either by saying “Maybe I’m thick…” and “What am I missing?") said:

“So, If I’m a contractor who has to go to an umbrella company as a result [of IR35 reform], I lose 30% of the revenue I expected.

"And as a result of Coronavirus, I’m finding that my ability to generate revenue is severely depleted. What is being done on…6th April by the government to compensate for this?”

Not accepting Ms McDonald’s opening reply of “At a macro level…",  Lord Forsythe persisted, reiterating:

“No, no. I’m a contractor and I'm faced with this problem. A problem that has been created by your policy change.

"And you’re saying that the government has thought about what might be done to help those people. So what are you going to do to help me in those circumstances?”

'You're not taking responsibility'

Later in the session, a similar apportioning of blame was made by Baroness Kramer.

The Lib Dem peer told the Revenue's Ms McDonald: “It sounds as though you’re not taking responsibility for the unintended consequences of your policy, which is interesting.”

Elsewhere in the session, the officials were accused by the peers of using the IR35 reforms to ‘pass the buck’ by making engagers “tax collectors;” of destroying bonafide contractors’ commercial relationships and of not embarking on “significant consultation” – the exact opposite of what the duo told the committee that they had done.

Editor's Note: UPDATE -- Government in shock delay to IR35 reform, thanks to peers and covid-19