Rishi Sunak sent final wishes on IR35, umbrella regulation, before Autumn Budget 2021

The pandemic will preoccupy the chancellor at Autumn Budget 2021, making even the best thing he could do for UK contractors – regulate umbrella companies – an outside bet.

Sounding this consensus last night, experts said the second best outcome of Rishi Sunak’s package on Wednesday would be an acknowledgement of the upending IR35 has caused.

But mirroring the concern about the already government-backed SEB so it can regulate umbrellas, covid is likely to stop Mr Sunak from doing anything meaningful on off-payroll.

'IR35-inspired schemes to dupe contractors'

“We know that the off-payroll rules introduced in April have given rise to a proliferation of disguised remuneration schemes that are keenly working to unwittingly dupe contractors into signing up for them…[but] the chancellor has a mammoth task on his hands,” Crawford Temple, CEO of Professional Passport told ContractorUK.

In a statement, Mr Temple explained: “The [Autumn Budget’s] backdrop [is] the pandemic and the huge funding that was needed to get the country through a challenging time which saw the highest levels of borrowing in peacetime.”

Not just because of covid, but also because they are still bedding-in, Brookson Legal is similarly not expecting anything from Mr Sunak to alter the April 2021 off-payroll rules.

'IR35 never been more important'

“[Despite the] challenging post-pandemic economy… IR35 has never been more important [because] the flexible labour market is crucial to our economic growth and development, which has been emphasised by the continuing pressure on the HGV sector, where a shortage of drivers has had a direct effect on all supply chains.

“We do not, however, expect the government to make any significant changes to this legislation – the new IR35 rules are very much here to stay,” the law firm says.

Moreover, HMRC is now moving into “enforcement mode” of the new IR35, with the message ‘it’s up to businesses to make this work,’ warns the firm’s legal head Matt Fryer.

'Resist the urge'

Fresh from defending two contractors on the sharp end of that now-underway HMRC enforcement of the April 2021 framework, is status advisory Qdos.

It wants the chancellor to “resist the urge” to penalise the “smallest businesses,” given IR35 is already among the existing “raft of tax reforms” making working for oneself difficult. 

“[Contractors are today] bearing the brunt of the government’s post-pandemic tax strategy, whether it’s the social care levy, IR35 reform or the incoming corporation tax increase.”

'Moral issue'

Seb Maley, Qdos CEO continued: “This isn't just an economic decision [weighing on Mr Sunak on Wednesday], it’s also a moral issue.

“Further tax reform that negatively impacts the self-employed -- millions of whom did not receive any support whatsoever throughout the pandemic -- is not only counterproductive, but is deeply unjust.”

The lens of covid support is how the chancellor’s offerings to PSC directors (and others who work for themselves) should indeed be viewed through, believes Forgotten Ltd.

'Hell-bent'

“Rishi Sunak and HM Treasury [appear] hell-bent on taking out a huge chunk of the small business community…[because of] policy [decisions], not administrative difficulty,” the group posted last week, dismissing the official rationale why DISS could not be adopted.

Sounding downbeat on the chances of support for contractors on Wednesday, Forgotten Ltd added: “What we have found over these long months of trying to get heard…[is that] he’s gone native and been captured by HMT.”

Potentially worse still for PSCs, the little covid support which was made available by the government won’t be revived at Autumn Budget, according to legal advisory Chartergates.

'No more furlough'

“The likelihood of the Coronavirus Job Retention Scheme being extended is low, [especially] given the [wording of the] Chancellor’s party conference speech,” the advisory’s Naseerah Mussa told ContractorUK.

The Autumn Budget…is more likely to expand on the chancellor’s ‘Plan for Jobs’ initiatives, including, but not limited to, the Kickstart Scheme and the Job Finding Support scheme.”

In an update to its clients, Chartergates acknowledged the big push to regulate umbrellas but confirmed fears that covid might snooker it.

“There have been calls for the forthcoming Autumn Budget…to introduce the SEB,” the advisory wrote, “and for the chancellor to allocate funding for the body.

“Yet it seems that this might be overshadowed by the need to rebuild public finances as a result of the ongoing covid-19 pandemic.”

'Tardy process'

Brookson’s Mr Fryer says he backs the regulatory push, saying regulating umbrellas would “support the growth of the flexible contractor workforce during a key period of recovery.”

But even if funding is granted for a Single Enforcement Body, off-payroll.org James Poyser writes exclusively tomorrow for ContractorUK, it will “take time to come to fruition.”

“We know that funding has been put in place to set up a Single Enforcement Body,” reflected Professional Passport’s Mr Temple. “But it is a tardy process and, all the while, non-compliant operators [will] continue to do business.”

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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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