IR35 off-payroll review at Autumn Statement 2022 ‘would show government as serious about status’

Only if the new Rishi Sunak-led government is “serious” about status and IR35 will chancellor Jeremy Hunt’s Autumn Statement 2022 contain a review of the off-payroll rules.

So suggests Moore Kingston Smith partner John Hood, who believes Mr Hunt’s statement on November 17th will act almost as a litmus test for the government’s intentions on contractors.

“If the government is serious about providing contractors with certainty about their tax affairs, reviewing IR35 is essential and a matter of priority,” Mr Hood told ContractorUK.

'Sufficient time'

A tax dispute resolution expert, Hood concedes it “remains to be seen” if the new government deems IR35 “important” which, he said, would mean allocating “sufficient time” to review it.

But it is exactly because of concerns over productivity – known to be a fixation of Mr Sunak – that another tax adviser fears an IR35 off-payroll review will not be unveiled on the 17th.

“I think the delay and upgrade [of the Medium-Term Fiscal Plan to Budget status] signal that we should expect some big announcements.

“So tax rises and spending cuts. But I can’t see any wholesale IR35 review being announced; I think it would just be too inefficient,” LITRG’s Meredith McCammond told ContractorUK.

'Review the off-payroll rules' application'

Yet in just his first 10 days as PM, Mr Sunak has already being called to run exactly that -- “a wholesale review” of IR35, to include the “application of the off-payroll working rules.”

Kate Shoesmith, deputy CEO of the Recruitment & Employment Confederation -- which issued the call, last night told ContractorUK:

“It seems that everyone, from the highest levels within government [and their departments], to contractors, our members and their clients, finds IR35 difficult to deal with.

“The U-turn to scrap changes to IR35 is the latest in a long line of confusing changes…we have had too many employment-related policy decisions, drafted from the headline down.

“To fix IR35 once and for all, it is time to start working from the workplace up, in partnership with the hiring business, the recruiter and individual contractors.”

'Contractors fed up with uncertainty'

Jacob Bellas is one such individual contractor. And he echoes the frustration -- so he’s hoping No 11 Downing Street will finally lance the boil on the 17th, because he senses No 10 won’t.

“The delay to the Medium-Term Fiscal Plan is itself another uncertainty for contractors, who are fed up with all the U-turns and changes to policy,” began Bellas, of Contractor Voice.

“Hopefully the extra time will be used [by government] to take valuable consideration of the entire temporary workforce -- both PSCs and contractors working via an umbrella company.

“But every contractor I speak with has little faith in Rishi Sunak making any provision for contractors, in light of us being overlooked significantly during covid and IR35 private sector reform. Both of these, Sunak was a key decision-maker in -- to the detriment of contractors.”

'Health and Social Care Levy revived, or repackaged'

The 1.25 percentage points increase in both National Insurance Contributions and dividend taxation is another policy introduced under Mr Sunak, when he was chancellor.

And because the NICs increase has been removed but the dividend tax increase has not, the Low Incomes Tax Reform Group (LITRG) fears the worst.

Even though -- if LITRG is proven right -- what currently represents another one in the eye for PSCs could be papered over, the group’s Ms McCammond explained.

“Could we see a revival or repackaging of the Health and Social Care Levy? That would then help make more sense of the dividend tax reduction from April 6th 2023 getting scrapped.”

'Dividends-earnings discrepancy'

Ms McCammond continued to ContractorUK: “Currently the 1.25% rate increase from April 6th 2022, which was only introduced because of the Health and Social Care Levy, is retained.

“That now changes indefinitely the difference in tax-cost between receiving income as dividends versus earnings, with no real stated justification. That’s not been flagged up enough.”

With more than a few flags protruding from it however, is the Single Enforcement Body.

'Single Enforcement Body for umbrella companies overdue'

The REC says the SEB is “overdue” and wants Autumn Statement 2022 to finally pin down its formation – even if those details have to be squeezed into the sought-IR35 review.

“Although the Intermediaries legislation has been reviewed and amended several times over the years, we still don’t have a CEST tool that’s fit for purpose; suitable regulations for the whole labour supply chain including umbrella companies, or enough resources within government to clampdown on the bad practice out there,” regretted the confederation’s Ms Shoesmith.

At Moore Kingston Smith, Hood was speaking about an IR35 review but a call he issued for Hunt to rise to the challenge will sit well with the many hoping for umbrella company regulation.

“This [the 2022 Autumn Statement] is an ideal opportunity for the government to grasp the nettle”, he said. “[And] provide much-needed clarity for professional contractors.”