Why Trump's chances trump Hammond's on IR35 reform
It’s not often you wish for ‘fake news’ but the contractor industry is probably quietly hoping that mainstream press stories about public sector IR35 changes being superimposed on the private sector are just completely made up.
Yet it is the arbiter of fake news who comes to my mind. In fact, I’d wager that Donald Trump has a greater chance of winning a second term as US President than any purported IR35 changes in the private sector ending well for the UK government, writes Paul Gough, managing director of Intouch Accounting.
If Philip Hammond, the chancellor of the exchequer, thinks that knowledge workers in the flexible workforce are an easy target for increasing the tax take, and if he continues to regard their contribution to the UK economy as peripheral to its overall wellbeing, then shame on him. He will end up with even greater credibility issues than he’s got already (remember the NICs hike that wasn’t just days later?). He’d also face (more) questions over his judgement.
The IR35 ‘experiment’ in the public sector has not delivered the neat outcomes which the Treasury and HMRC expected, and that is even under the favourable conditions where the engager is part of their team! Imagine the chaos should the ill-considered, poorly defined outcomes be forced upon the vital and fiercely independent private sector.
My message to Mr Hammond as the boss of not just a respected tax and accounting practice extremely familiar with IR35, but also as the chairman of the FCSA, which represents contractors and their service providers, is this:
‘If you really want to level the playing field in terms of employment rights and protection of the vulnerable, then that is laudable and will have the support of many. However, if all you really care about is once more trying to increase the tax take from a flexible workforce that chooses to swap employment rights for greater freedoms and flexibility, then you’ll need to think again.’
Determining the manner in which intelligent and entrepreneurial people work is not the role of government. Pressurising engagers and end-clients to treat independent workers as ‘employees’ (while giving them none of the associated rights) will restrict growth, harm productivity and pass the burdens and costs of these changes onto the very same vulnerable workers you are trying to protect.
So why even consider introducing the IR35 reforms into the private sector? I think deep down the government is aware of the likely backlash to its potential interference. In my less pessimistic moments, I also think that the Treasury’s Mel Stride publicly considering it in advance is the government ‘dipping their toe in the water.’ Let's hope 'Spreadsheet Phil' notices that the tingling in his feet is the warning he needs to step back from making a big splashing mistake. Having two ears and one mouth is a sign that they should be used in that proportion. Let's see who has been listening on November 22nd.