Contractor sector calls Sajid Javid’s IR35 reform review an insult

Sajid Javid wrongfooted the entire contractor industry yesterday – not once, but twice – in what critics say is “an insult” to the freelance and contract workforce.

Firstly, the chancellor defied convention by not answering numerous MPs who lined up at Treasury Questions to press him on both the date of the IR35 reform review and its terms.

Secondly, and in what PSCs say is a betrayal of his election vow, Mr Javid’s officials quietly specified that the review will probe the reforms’ implementation, not the reforms as a whole.

'Make sure the IR35 changes are right to take forward'

In late November, campaigning for Tory votes, the chancellor told Radio 4’s Moneybox that “one thing in particular” he wanted to “look at again” were the “proposed changes to IR35.”

Before clarifying that he was talking of the IR35 reforms from April, Mr Javid specified that he would like the review to “make sure that the proposed changes are right to take forward.”

But yesterday, the Treasury said the now-underway review would only “determine if any further steps can be taken to ensure the [reform’s] smooth and successful implementation”.

'Fair to criticise'

For the avoidance of doubt, the word ‘implementation’ or ‘implementing’ is used some 10 times in the HMT press release announcing the review. Its new slimmed down scope is not pointed out.

“Criticism that the review will look solely at implementation of the reforms instead of the reforms’ suitability is indeed fair,” says Seb Maley, CEO of IR35 advisory Qdos.  

In reply to questions from ContractorUK, he added: “The government should be asking the question of whether these changes are necessary, not just focusing on how they can better implement them.”

'Not what was suggested, or what's needed'

Julia Kermode, CEO of the Freelancer & Contractor Services Association said: “The review [focusing] on the implementation of the reforms rather than the reforms themselves…is not what was suggested [by Mr Javid].

“[And it] is not what is needed. I fear that today’s [announced review] is simply the government paying lip-service to empty election promises and [is] nothing short of an insult.”

AR Tax Accountants sounds bitterly disappointed too. “[The review] will actually only look at how to improve the implementation… so we have a ‘smooth’ transition.”

In line with an online post by the firm, Treasury minister Jesse Norman said: “The purpose of this consultation is to make sure that the implementation… is as smooth as possible.”

'Limited, inadequate'

But there is a reason other than its scope why the Association of Independent Professionals and the Self-Employed, among others, is branding the review as “limited” and “inadequate.”

“The government has…allocated only a disappointingly short period -- until mid-February -- for the review,” IPSE scorned yesterday.

“The government must urgently reconsider. It must give more time for a full review that includes an impact assessment of the changes in the public sector and the likely effects on the private sector.”

'Internal analysis'

The association also wants the review to be independently chaired – but the involvement of others is limited to HMT holding a series of roundtables for representatives of affected PSCs.

An “internal analysis”, including of CEST will be carried out too, and will extend to “public sector bodies’ experience” of putting the reforms in place, as they had to do in April 2017.

Mr Maley says his firm will join the roundtables. “Qdos will make itself available to participate in discussions and continue to stress the importance of…[a rethink] on IR35 reform.”

'Nobody can be sure'

But in almost the same breath, he acknowledged it might be a tall order. “The wording of the [HM Treasury review] document does appear to rule out a delay, but of course, nobody can say for sure.”  

Nonetheless, the sure-fire way to not get burned is to plan for the April 6th commencement date, meaning the reform won’t get deferred, according to Matt Fryer of Brookson Legal.

“Businesses, contractors and recruiters should take today’s announcement as solid confirmation that the legislation will be coming into effect this April, as planned,” he said.

“The wording of the [HMT] statement clearly indicates that there will be no last-minute policy U-turn. Anyone who has not taken the necessary action to prepare yet, should do so now.”

'Contractors should carry on'

Carolyn Walsh, a former tax inspector agrees, advising: “Contractors should carry on taking action to manage their way through the off-payroll working rules, or rather their hirers’ application of them.

“Remember, even if the April 6th rules do get shelved, hirers have already started viewing contractors, particularly agency workers, in a different light.

“Plus, if the hirers don’t now suffer burdens and liabilities under [the new] IR35, then contractors continue to do so, and they need to be sure of their status and position.”

'Wholesale retreat unlikely'

Yvonne Gallagher, partner at Harbottle & Lewis also believes that it is now “unlikely” that a “wholesale retreat” from its ‘revenue-raising’ proposal will be launched by the government.

Indeed, yesterday’s HMT press release outlining the review goes on to talk of “implementation on 6 April 2020,” and the IR35 reforms “being introduced in April 2020”.

But Gallagher is hopeful for some change. “There may be scope for the impact of the legislation to be reduced in terms of the range of contractors to whom it will apply,” she said. “Or the size of the clients who will be obliged to operate it.”

'Concerning trend'

Brookson Legal reflected: “The best that can be hoped of the review is that it will address the concerning trend of large users of contract labour bypassing their obligations under the new rules by enforcing blanket bans on the use of contractors in their supply chains.

“It would also be helpful to have further clarity on responsibility for IR35 compliance within the supply chain, as this will be a key issue for businesses working with recruitment agencies moving forwards.”

Tax body the Association of Taxation Technicians hopes the review will fill in legislative gaps.

'12 months'

The ATT’s Jon Stride said: “When liability can be transferred within an engagement supply chain and exactly what information will need to be shared by clients, are not addressed in the draft legislation for the off-payroll rules at all.”

The association added that in light of businesses having less than three months to prepare for the changes to IR35 being applicable, a more sensible commencement date would be April 6th 2021.

At Brookson, Mr Fryer also has that date marked in his diary -- but because it represents an ideal end-date.

“A ‘soft landing’ post-April [2020], with HMRC using the first 12 months to continue to educate, rather than seek to punish businesses who have not been able to get their house in order [is desireable],” he said.

'Javid has fobbed us off'

Status expert Rebecca Seeley Harris prefers that it's contractors who are being punished -- seemingly just for voting for the Tories on the basis of what Mr Javid promised that his party would deliver.

She told ContractorUK last night: "The chancellor promised a review to get the contractor vote but now fobs us off with a review, not of the legislation but, of the implementation.  A very cynical exercise indeed.

"If that is what we have to work with then instead of bemoaning the situation, I guess the time would be best spent analysing the legislation and pointing out the difficulties in implementation."