No 'IR35' in Spring Statement splits contractors' advisers

The contractor sector must wait a little longer to learn the fate of IR35 in the private sector, as today’s Spring Statement made no mention of it.

“Predictably, our sector has been left in the dark over potential IR35 changes,” says Seb Maley, chief executive of IR35 advisory Qdos Contractor.

Referring to a consultation on IR35 -- promised at 2017’s Autumn Budget, Mr Maley added: “The government must realise that the sooner they offer clarity over the situation, the better.”

Asked before today’s slimmed-down Budget whether the consultation would be unveiled by the chancellor, HMRC said it would not provide additional information about its timing.

Still 'evaluating'

So it’s “no surprise that he chose not to use today’s statement to say anything new” on IR35 reform, says Julia Kermode of the Freelancer and Contractor Services Association (FCSA).

It is perhaps not a surprise because only late last month the government was still “evaluating the impact of the public sector reform” -- which is the likely model for private sector reform.

In response to a Tory MP, the Treasury also spoke on February 28th of the external research into the April 2017 changes, which is firmly expected to be released before the consultation.

“Should the government carry out a fair and considered review into last year’s public sector reform, they will realise that further reform is neither wise nor necessary,” Mr Maley said.

He also issued an alert: “[And] no news [today on IR35] isn’t necessarily good news. To avoid mistakes made following IR35 changes in the public sector, it’s vital the private sector is given a fair amount of time to prepare”.

The FCSA disagrees, saying that “no mention” by the chancellor of future IR35 reform hopefully “shows that the government has listened to…[the] many concerns and the impact the changes have had on the public sector”.

'Incredibly frustrating'

Regardless of whether its omission has positive or negative implications, IR35 expert Kate Cottrell is disappointed.

“The fact that the consultation has not been published today is incredibly frustrating not least because we could then get a better idea of timescales”.

She also said: “It could of course be published tomorrow so there is absolutely no room for complacency at this stage.

“[So] everyone potentially affected needs to take some action now. Contractors should be raising IR35 with agencies and clients, and agencies and clients need to understand what it means for them and their businesses now.”

The former tax inspector is not alone in believing that the absence of the IR35 consultation at today’s Spring Statement does not mean that it is no longer imminent.

“There may be further information released in due course,” agrees James Brew of FPS Group. “As always, the devil is [going to be] in the detail”.

'In the coming months'

However, according to written ministerial statements laid in parliament today, the contractor sector is not going to have to pour over the IR35 consultation momentarily.

In fact, a Treasury spokeswoman referred ContractorUK to a page on Hansard revealing that the consultation to decide IR35’s future will be published no sooner than “the coming months.”

“[This web page on the UK Parliament website] actually confirms that this consultation will be published in the next few months,” the Treasury spokeswoman said this afternoon. “So it is providing certainty on timing.”

'Work with businesses'

Further aimed at offering reassurance to affected and concerned parties, a section on the page about the “off-payroll working” consultation states:

“The government will work with businesses and individuals to mitigate the potential administrative burdens of any future changes.”

Graham Jenner, boss of accountancy firm Jenner & Co reflected: “IR35 [changing] within the private sector….is unlikely to go away anytime soon.

“[But] it is to be hoped that the problems encountered with implementing the changes in the public sector have made the government think carefully about any changes within the private sector.”

'Dark cloud over VAT'

In the absence of anything in the Spring Statement about IR35, another accountancy expert -- David Whiscombe – calculates that the most significant announcement for PSCs is potentially related to VAT.

Pointing to a newly announced consultation about the VAT registration threshold, the BKL tax partner said: “If a way could be found to ‘soften’ the cliff-edge of the registration threshold, that may benefit [limited] companies.

“Our fear is that any change of that kind is likely to introduce further complexity into what is already an over-complicated VAT regime and may cause more trouble than it saves.”

Contractor group IPSE says that as a result of the consultation, “a dark cloud now hovers” over VAT for people who work for themselves.

“[The chancellor’s] call for evidence should be viewed cautiously,” it warned. “If the government were to decide to lower the VAT threshold, it would be a disaster for small businesses and the self-employed.”

Editor’s Note: Further expert analysis and reaction, including a guide to Spring Statement 2018 will be published on ContractorUK tomorrow morning.