Rishi Sunak quits as chancellor, leaving IR35 reform and covid-stranded limited companies in his wake

Rishi Sunak resigned out of the blue yesterday, depriving the government of the chancellor of the exchequer who took on UK contracting by ushering in upending private sector IR35 reform.

Mr Sunak’s shock departure came at around 7 o’clock last night, just minutes after a one-time critic of IR35, Sajid Javid, also quit the cabinet, relinquishing his role as health secretary.

Both said they could no longer back Boris Johnson after the PM said he didn’t know, then did know, of 2019 claims against Chris Pincher MP, who quit last week over groping allegations.

But out of the three departures, it is Mr Sunak’s which is triggering contractors despite it appearing unrelated to the intense pressure he faced after his heavily criticised Spring Statement 2022.

'Too good to be true'

In his resignation letter to Mr Johnson, Mr Sunak makes clear he is stepping down over No 10 changing its account of what it knew about Mr Pincher, which it has done on three separate occasions.

Using language oft-used by HMT to warn against DR schemes, the outgoing chancellor tells the PM: “People know that if something is too good to be true, then it’s not true.”

Mr Sunak also wrote – and then later tweeted (presumably for emphasis): “The public rightly expect government to be conducted properly, competently and seriously.

“I recognise this may be my last ministerial job, but I believe these standards are worth fighting for and that is why I am resigning.”

'Good riddance'

Yet contractors are staying dry-eyed.

“Good riddance Rishi, you won't be missed,” wrote one IT contractor, a Business Architect.

“Whilst you're sat at home… thinking what to do next, you should probably avoid going for a stroll and a few pints in any pubs where ‘the forgotten’ three million drink.”

Another contractor, a director of her own limited company echoed: “There’s not much love lost between the self-employed and Rishi.”

'Protected businesses'

During the covid-19 pandemic, Mr Sunak was repeatedly called to provide a limited company-specific package of funding to help such tiny traders stay afloat.

But he never did. The three million firms excluded from state aid (a figure Mr Sunak disputed) became known as ‘the forgotten,’ and a lobbyist set up to campaign on their behalf.

However, the now-former chancellor’s resignation letter claims he actually did the complete opposite of giving small companies only scant support.

“It has been an enormous privilege to serve our country as chancellor…and I will always be proud of how during the pandemic we protected people’s jobs and businesses”, he told Mr Johnson.

'Sunak largely failed to realise self-employed's covid plight'

Chris Bryce, CEO of the Freelancer & Contractor Services Association isn’t falling for Mr Sunak’s attempt to rewrite the history books.

“Rishi Sunak largely failed to realise and respond to the plight of the self-employed during the covid crisis,” Mr Bryce told ContractorUK.

“Misguided IR35 reform [introduced under his watch] has been hugely damaging to the UK economy [too], making it less agile and restricting access to a flexible workforce.”

'Rarely delivered for contractors'

Seb Maley, chief executive of Qdos regards Mr Sunak’s chancellorship similarly.

“While Sunak said all the right things about supporting freelancers, contractors and the self-employed, he rarely delivered,” Mr Maley told ContractorUK.

“And so I wouldn’t be surprised if he’s remembered by independent workers for the raft of tax hikes introduced, along with the gaping holes in the covid-19 support.”

Asked about Mr Sunak’s newly announced replacement as chancellor, Nadhim Zahawi, Mr Maley said Mr Zahawi would be “wise to fight the corner of the self-employed,” as their “economic contribution is arguably needed [now] more than ever.”

'New chancellor Zahawi should review IR35 at Autumn Budget 2022'

At the FCSA, Mr Bryce is hoping for more -- a specific pledge from Mr Zahawi on the off-payroll rules, potentially as soon as Autumn Budget 2022.

A former contractor, Mr Bryce said: “[The new chancellor] should take the opportunity to review IR35 as a matter of urgency.

“The rest of our tax system – and indeed the employment landscape as a whole – is based on a 19th century vision of labour and work.

“We need a wholescale revision of the entire system to bring it into the digital age. [Mr Zahawi]…must free up our economy and make the joined-at-the-hip levers of taxation and employment law fit for the 21st century.”

'Safe pair of hands'

Widely regarded politically as a 'safe pair of hands,' former transport secretary Mr Zahawi has received praise for the covid vaccine rollout, after he was made vaccines minister in November 2020.

But quietly, he may be reticent about accepting the second most powerful position in government, as Mr Sunak’s resignation makes Mr Johnson the only PM since the war to suffer two chancellors walking out.

A legal adviser to contractors says Mr Sunak made the right decision in stepping down however, as did Mr Javid.

And their ex-boss should now follow their example.

'In the name of God, go'

The adviser explained his assessment: “Back in January, Conservative MP David Davis said it best to Boris, because it was right then, and it’s right now.

“And it’s this. ‘You have sat too long here for any good you have been doing. Depart, I say, and let us have done with you. In the name of God, go.’

"But Johnson appears to be unlike Sunak and Javid, because at least they have shown they have some honour.”

'Tried to compromise'

In his resignation letter, Mr Sunak reveals that he hasn’t always seen eye-to-eye with Mr Johnson.

“I have always tried to compromise in order to deliver the things you want to achieve,” the prime minister is reminded. “On those occasions where I have disagreed with you privately, I supported you publicly.”

The confirmation of tensions between the two follows a mainstream press item claiming Mr Johnson wanted to cut the corporation tax rate next year, but that Mr Sunak vetoed any reduction.

'Sunak only put there to control finances'

A former tax inspector who now runs an accountancy firm reflected to ContractorUK last night: “I never felt Sunak fully understood the tax system.

“Rather, it was like he was only put there to control the finances. Obviously covid and Brexit clobbered any hope of keeping the country’s finances on track. But he has clung on -- even after his non-dom ‘issue.’ So as far I’m concerned, Pincher is probably just a good excuse”.

Rishi Sunak’s biography on .gov states that before politics he had a “professional career” in “business and finance" -- working internationally, and that he co-founded an investment firm.

“Working with companies in multiple geographies”, adds the official bio, “he [went on to use] that experience to help small and entrepreneurial British companies”.

'Hindered those who want to work for themselves'

But as chancellor, Mr Sunak didn’t come across as an independent thinker and he did far too little to back enterprising-types, believes Mr Bryce.

“It is unfortunate that Rishi Sunak chose to follow and build on the policies of his predecessors, notably [Gordon] Brown and [Philip] Hammond, in deliberately following a path which hindered the ability of those who want to work for themselves to do so.”

Almost appealing to new chancellor Zahawi, the FCSA’s chief executive added: “Let’s get back to a Britain which appreciates and nurtures those who choose to work for themselves, and enable, equip and encourage them to be successful and reap the rewards of that success.”

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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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