Hammond’s silence on IR35 stokes reform fears at Budget 2018

Philip Hammond not uttering IR35 in his Tory Party conference speech has done little to convince contractor experts that private sector reform will be missing from his Budget 2018.

In responding to the chancellor’s address in Birmingham yesterday, which made no mention of anything status-related, the REC said he should refrain from further revisions to IR35.  

“[Mr Hammond] must hold back from IR35 changes in the private sector that will punish compliant businesses and open the way to tax avoidance,” said REC’s CEO Neil Carberry.

'When, not if'

Urging the chancellor away from an action he did not say in his speech he will take may seem odd, but aligning the private with the public sector on IR35 has been described as inevitable.

So inevitable that on its blog, Accountax says the only real question ‘is when’ – and an April 2019 commencement date is its hunch, despite suggestions by others that it may be too early.

“Until the consultation was issued, on 18 May 2018, we would have argued that there was enough going on politically to suggest 2020 at the earliest," the advisory wrote.

“However, the potential time line is very similar to the approach followed in 2016 for the April 2017 implementation of the public sector changes and suggests that the train has been set in motion for April 2019.”

'Shelve any plans'

Similar to the REC, another status specialist who heard no mention of IR35 yesterday from the chancellor made particular mention of it when asked about likely announcements on October 29th.

“It makes sense for the chancellor to call an early Budget given the uncertainty that still hangs over Brexit…[but] we urge him to look at the bigger picture and shelve any plans that might be in place to extend IR35 changes to the private sector,” said the specialist, Qdos.

Chief executive Seb Maley explained: “Public sector reform has not been a success and there’s no proof to show that it has increased compliance. If anything, it’s resulted in thousands of contractors being wrongly placed inside IR35 by their engagers.”

'Not a great leap'

Despite an increasing amount of evidence in support of wrong determinations under the April 2017 framework, extending it to all engagers might be worth the £1billion pay-off.

“It is…not a great leap of imagination to assume that the chancellor is eying up an additional £1bn in revenue coming from the private sector (to add to the £410m the consultation suggested had been raised from the public sector changes), and is unlikely to want to pass it up,” Accountax said in a statement.

Paul Mason, national account manager at IR35 advisers Abbey Tax, said: “A Budget statement before the outcome of the Brexit negotiations are known -- a chance [for Mr Hammond] to get some revenue-raising measures through? Unleashing IR35 [reform] onto the [private] sector in April 2019 may be an easy-win.”