Chancellor Sunak vows IR35 reform 'tweaks' ahead of 12-month 'soft landing'

Rishi Sunak has vowed “tweaks and improvements” to April’s IR35 framework so “the transition” from the Intermediaries legislation of 2000 to 2020’s Off-Payroll rules is as “seamless as possible.”

The new chancellor of the exchequer also promised that as enforcer of the new rules, HMRC is “not going to be at all heavy-handed,” albeit just “for the first year” of their implementation.

Despite this implied ‘soft landing’ for the 12 months from April to “give people more time to adjust,” Mr Sunak’s comments in a Q&A at the weekend have been almost universally condemned.

'No point in soft landing'

Contractor accountant James Poyser, who was sent a mobile phone clip of the chancellor at the Q&A, told ContractorUK last night: “There’s no point in a soft landing. If they're worried about implementation, then delay.”

Speaking in Birmingham, Mr Sunak claimed that although “nothing has changed in the law” (he later acknowledged that companies will decide IR35 status), he said the April 6th reform is “going to mean a change for some people.”

On LinkedIn and taking into account the chancellor’s 12-month commitment, an IT contractor reflected: “It's not going to be a soft landing for all of those companies who suddenly can't get anything done after March.”

'IR35 reform review available shortly'

Others online, including a former tax inspector, indicated that the type of “tweaks and improvements” which Mr Sunak said the IR35 Reform Review would “shortly” unveil, is unlikely to change the fundamentals of IR35 for the better.

“If a career politician had the perennial problem and worries about where [the] next contract is coming from…then he might just understand the difference about…Mutuality, sufficient…[Control], and Being in Business on Own Account,” the ex-inspector said.

But also online, the new chancellor was attacked personally too; for his perceived inexperience, age, and “lack of conviction.” Others said his officials had clearly “duped” him already.

'HMRC to take supportive approach'

Asked about the video of Mr Sunak, a spokesman for the Treasury told ContractorUK: “We recognise that this is a significant change for businesses.

“And as the chancellor has said, HMRC wants to take a supportive approach to help businesses to apply the rules correctly going forwards.”

The HMT spokesman did not comment on what the soft landing might mean, in practice; nor did he provide details of the “tweaks or improvements” due to be recommended by the IR35 review, which has now concluded but remains under wraps.

So they can be read in their proper context, Mr Sunak’s comments during the Q&A in Birmingham were as follows:

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Nothing has changed in the law. We’ve always had a law which means you should pay the tax bits [sic] for the type of work you have.

What’s been clear is, for a long time, those laws haven’t always been followed. And what IR35 [reform] does is change the balance so instead of people making the assumptions about how they should be taxed, we put the onus on companies to make that assessment for them.

Now, that is going to mean some changes because some people, unfortunately, were operating in a way which meant they weren’t paying the tax they probably should have been. Because, essentially, they were employees but they were being taxed as if they were self-employed -- and there’s quite a difference there.

And it’s not fair to all the people who are employed that someone else doing the same job is paying less tax. Ultimately, that tax pays for the NHS, social care and everything else. So it’s right that that unfairness is corrected and it is going to mean a change for some people.

What I would say is that it’s a policy that’s been in train for quite a while. So it’s not a sudden change; we’ve known about it for a while and we’ve been consulting on it. And we’re shortly to publish a review of how it should be implemented which will have some tweaks and improvements to make sure the transition is as seamless as possible.

What I can also tell you is that I’ve spent time with HMRC to ensure that they are not going to be at all heavy-handed for the first year to give people time to adjust as well, which I think is an appropriate and fair thing.

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The comments of Rishi Sunak, chancellor of the exchequer.

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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