Sense on IR35 must prevail today -- to avoid disaster

Today, chancellor Philip Hammond will deliver his first Spring Statement, which we – and the rest of the contractor community -- have been assured will contain no fiscal changes, writes Andy Chamberlain, director of policy and external affairs at the Association of Independent Professionals and the Self-Employed (IPSE).

This new timetable marks a departure from the schedule to which we’ve grown accustomed, where the Spring event was the Budget, and the Autumn event, the statement -- though in practice it was really just another Budget.

The move from two fiscal events to one is not uncommon though. It was last seen in the UK during Ken Clarke’s reign as chancellor in the 1990s. Having one fiscal event is common across Europe and is designed to provide businesses with additional confidence relating to the stability of tax policy -- something which we’ve been crying out for in recent years.

On the surface then, the promise that the statement will contain no fiscal changes is welcome. The last thing the UK’s self-employed need is any further tinkering with the tax system, as it is this population that has been the target of the most controversial tax changes in recent years. Mr Hammond’s attempt to raise the rate of Class 4 NICs, and his subsequent U-turn, caused mass consternation. And the changes to the way IR35 works (or doesn’t) in the public sector have been problematic -- to say the least.

But by ruling out ‘fiscal changes’, the chancellor hasn’t necessarily ruled out making policy announcements. And the big one we’ll be watching out for is the promised consultation on extending last year’s IR35 changes from the public to the private sector.

In November 2017’s Red Book, the government announced it would consult on tackling, “non-compliance in the private sector, drawing on the experience of the public-sector reforms, including through external research already commissioned by the government and due to be published in 2018.”

Most commentators, including us at IPSE, guessed that the consultation would be released at around the time of the Spring Statement, as this would be consistent with the timing of previous consultation documents. However, ministers have been suspiciously quiet on the subject recently and there’s still no sign of this ‘external research’, which presumably would be published before, or least at the same time as the consultation.

In addition, there is now a raft of consultations that have sprung out of the government’s response to the Matthew Taylor review of modern work; one of which is on Employment Status. The contents of that could have a significant impact on IR35, and it would seem sensible to let that discussion come to an end, before embarking on a separate but heavily intertwined discussion on IR35.

But governments aren’t always sensible, and there is still a very good chance we could hear something on IR35 today. Our view on this issue could not be clearer -- it’s a disastrous policy that will heap huge amounts of administrative burden onto businesses, choke off the supply of skilled, flexible professionals and lead to perfectly tax-compliant contractors being forced to overpay tax unfairly.

So, we’ll be ensuring the government are well aware of the damaging realities of this ill-conceived and inhibiting legislation. Because, in a time of great economic and political uncertainty, we need to utilise this highly-skilled cohort and unfortunately IR35 is nothing but a hinderance to the growth, flexibility and expertise the UK needs.

Editor's Note: ContractorUK will today publish the chancellor's Spring Statement 2018 in full, and report on any announcements affecting contractors, with input from IR35 and other contracting experts.