Contractors look less of an Autumn Budget target, say IR35 experts

Experts on IR35 are less certain that PSCs will be in the chancellor’s crosshairs at Autumn Budget 2020, partly as they already stand to be hit by the off-payroll reforms in April 2021.

Following coverage of Rishi Sunak’s reported intentions to hike almost all the taxes PSCs pay, status adviser Kate Cottrell said it looks more likely he will put up only a “few” levies.

“A document Mr Sunak was photographed holding last week prior to addressing the 1922 committee…stated he wouldn’t hike [many] taxes or make instant changes in the autumn.

“And economists widely agree” she continued, “-- all this tax-raising is for somewhere in the future, the next few years instead, as [doing it now] would so badly damage the economy.”

'Odd tweak'

More likely from Mr Sunak is the “odd tweak” to NICs or Capital Gains Tax, predicts the former tax inspector, on the basis that universal hikes are at odds with the latest Tory manifesto.  

Already, the government is intending to reform IR35 from April 2021, in a move which will boost the exchequer but upend contracting as much as when IR35 was first introduced.

In a further sign that contractors might not be hit as hard as they fear, another IR35 expert said it wasn’t the chancellor’s NICs threat which was behind ‘PSC alternatives’ being mulled.

'OTS had a nudge'

The expert, Rebecca Seeley Harris explained her assessment: “No, Mr Sunak’s suggestion of hikes for one-person traders isn’t why the OTS has started looking at other PSC-style models.

“The Office of Tax Simplification usually does a stocktake every year. I should imagine OTS had a nudge from a Special Adviser [to do this new work]. Or from HMT’s Financial Secretary.”

As to the alternatives to PSCs which are being outlined by the OTS, a legal adviser suggested that the prospect of them featuring in an Autumn Budget announcement was slim.

'Disregarded as too complicated'

Dropping this additional hint that contracting might feature less in the Autumn Budget than the sector expects, the adviser said: “SEPA and Look Through [are both cited by the OTS].

“But the latter has been disregarded as too complicated, and it was thought that SEPA had merit but has not been taken any further forward.”

Nonetheless, Ms Seeley Harris, who once worked at the OTS, suggested that contractors with strong feelings about the models, or with their own ideas for an entity, could contact officials.

'Held at arm's length on IR35'

“The OTS genuinely welcome contributions,” the IR35 expert said, pointing to the OTS saying affected parties could contribute to its understanding about ‘PSC issues.’

But she cautioned PSCs hoping for an off-payroll rethink that “historically,” the OTS “has been held at arm’s length where IR35 is concerned”, so its officials won’t “get involved”.

“[Other than that], the OTS is very good at listening,” added the boss of ReLegal Consulting. “Especially to commerce. But if it was an official invite, they would be calling for evidence.”

'Increasingly untenable'

Resorting to Twitter, one independent consultant said it was the government itself which needs to listen better, if it wants to produce a Budget which makes business soloists stay the course.

In an echo of what one adviser said last week about contracting no longer being financially viable for some, the consultant, a specialist in security said:

“IR35 [reform is already] hitting all public contractors and [with the April 2021] plans to introduce to the private sector…it’s increasingly untenable for sole practitioners and companies to operate a viable business.”

'No real help to limited companies'

Taking issue with the chancellor directly, another consultant, specialising in business leadership training, posted in response to Mr Sunak’s rumoured intention to hike PSCs’ taxes:

“It sounds to me like having given no [real] help to limited companies during the pandemic, he now wants to tax them to help pay for those who did receive support!

“Surely [this would be a] a lose-lose [situation] and [would be] adding insult to injury for limited company owners.”

'Too few contractors left to fleece'

While another consultant said they will be simply too “few contractors left [for the chancellor] to fleece,” others suggested Mr Sunak had robbed the Labour party already -- of its policies.

“This looks a bit like Labour's manifesto at the last general election - increase corporation tax and align capital gains tax and dividend tax to the same rate as income tax!”

The director reflected: “Contractors closing their limited companies may want to consider their timing in light of a capital gains tax change.”

'War on contractors'

Also considering that same end-game for contractors, and inviting a veteran MP to intervene against a Budget that will almost certainly not support such workers, another contractor tweeted: “John Redwood, the Conservatives are in a war on contractors.

“And they have been for years. IR35 will already be the death knell for many. Covid-19 another excuse. How much tax will you get from a company once it's been forced into liquidation?”

“What is the point of raising all the taxes at this time when many are going out of business?” agreed Ms Cottrell, the co-founder of IR35 advisory Bauer & Cottrell.

“Or what’s the point in tax raising when we’re all working reduced hours anyway? It’d be much better [for the chancellor] to increase the tax take when folk are actually due to pay.”

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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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