Axe IR35 at Autumn Statement, says accountant, as Tory grandees attack off-payroll rules

A contractor accountancy boss has called for IR35 to go at Autumn Statement 2023.

But more than just calling, Teodora Dimitrova, owner of Chart Accountancy, wrote yesterday to two MPs to ask them to themselves seek the rule’s ‘removal’ three weeks from today.

“Large international companies have ceased hiring consultants residing in the UK due to IR35,” Dimitrova wrote. “In just one week, I've had two clients unable to secure contracts because of this issue.”

'Difficult to get contracts from companies'

Veteran Tory MP Sir John Redwood yesterday sent his ‘wish-list’ to chancellor Jeremy Hunt ahead of his November 22nd statement, and echoed IR35’s ill-effects:  

“The UK has lost 800,000 self-employed since February 2020. Some of this is the result of the 2017 and 2021 changes to IR35 taxation. It is now difficult for the self-employed to get contracts from companies.”

Sir John then told Hunt he should “restore the pre-2017 tax regime,” meaning the off-payroll framework and its central tenet of engagers deciding PSCs’ IR35 status would be no more.

Sounding her call from LinkedIn, Dimitrova implied it was the revised IR35 rules of April 6th 2017 in the public sector, and April 6th 2021 in the private sector, which she wants axed.

'Autumn Statement needs a modest tax cut, like do away with IR35 reform'

Even if the Chart Accountancy boss was taking aim at IR35 of 2000, Sir John is far from alone, because fellow Tory grandee David Davis also wants IR35 reform repealed.

“A carefully thought-through, modest tax cut, would have a big impact. I mean; I would do something like do away with IR35 [reform],” Mr Davis said in a recent Sky News interview about Autumn Statement.

The former Brexit secretary added: “Or maybe a partial inheritance tax removal, not a complete abolition. Or maybe a change in income tax. One of those sorts of things which will have direct effect on the ordinary person. And actually, have a beneficial economic effect [too].”

'Should IR35 get scrapped, MSC legislation would presumably go too'

Anthony Mellor -- a contractor accountant like Dimitrova -- is enthused.

“Politically, Davis’s idea [of offing the off-payroll rules] is [bound to be popular because it would] encourage enterprise, instead of stifling it,” the founder of Mellor & Co told ContractorUK.

“And presumably if IR35 were scrapped, the Managed Service Company legislation would get etched off the statute book as well.”

Qdos CEO Seb Maley isn’t so sure, signalling that even just one anti-contractor framework getting the axe this month is likely to be wishful thinking.

'Very slim chance of IR35 making an appearance at Autumn Statement 2023'

“We’ve seen more backbench MPs tabling it [an IR35 reform rethink] as a genuine option…[but] it wasn’t…mentioned by either [former prime minister Liz] Truss or Jeremy Hunt in their speeches at [last month’s Tory party] conference” Mr Maley says.

“[So] I think the chances of it making an appearance in the Autumn Statement…are very slim.”

Neither IR35 nor the off-payroll working rules being addressed by the chancellor in 21 days’ time doesn’t mean administrative improvements to either cannot be made by HMRC.

And it is these non-legislative improvements to IR35/the OPW rules -- in addition to the offset mechanism already pencilled in from April 6th 2024 -- which many are getting behind.

'Overhauling CEST'

Qdos operations director Nicole Slowey reflected yesterday: “While it seems unlikely that [an IR35 reform reversal like Sir John Redwood wants will] materialise, raising awareness of the flaws of the IR35 legislation is important.

“From overhauling CEST to ensuring businesses make fair, well-informed IR35 determinations, there’s a lot the government could and should do.”

An HR director Jonathan Krogdahl echoed: “The best thing they can do is to crack down on blanket bans.

“Make companies do it properly,” Krogdahl said of Status Determination Statements. “And [HMRC should then] give them assurances that if they [assess IR35 fairly], they won’t be targeted”.

'Tories would have to abolish IR35 in full'

Unsatisfied at mere ‘tweaks’ to IR35, YouTube user thomaswelch9147 wrote under a video of the Conservatives’ Mr Davis making recommendations to Hunt:   

“In order to encourage me to even think about voting Tory again, you'd have to abolish IR35 in full.

“You guys have promised removing it three times and done sod all about it. You crippled my business going into the pandemic where it pushed me under. [Prime minister Rishi] Sunak is directly responsible for [introducing] it [when he was chancellor]. A promise [relating to IR35] at the next general election is just simply not enough.”

'Assesment of domestic contractors securing short-term contracts from UK clients'

But the very latest from HM Treasury is a regurgitation of the government’s rationale, in answer to an MP who was concerned about the ill-effects which Dimitrova took to LinkedIn about.

The SNP's Patricia Gibson asked whether Mr Hunt has “made an assessment” of the potential impact of administrative changes to IR35 in 2021 “on the extent to which domestic contractors are able to secure short-term contracts from UK clients.”

Treasury minister Victoria Atkins responded: “The off-payroll working rules are designed to ensure that individuals working like employees but through their own company pay broadly the same income tax and NICs as those who are directly employed.

"The government and HMRC remain committed to understanding the impacts of changes made to the rules in April 2021, and have published external research and HMRC’s own internal analysis on the short-term impacts of the reforms.”

'Off-payroll working rules of 2017 and 2021, not working'

But both the research and analysis have been widely discredited, potentially why a senior information governance specialist has given an assessment of his own.

“The IR35 rules are killing the contracting market,” the specialist wrote last night. “I have a number of colleagues that have been forced to go perm due to the lack of transparency with the rules that govern [the revised] IR35. So obviously [the 2017 and 2021 frameworks are] not working, and should be killed”.

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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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