Brexit could shelve IR35 reform at Budget 2018

The prospect of an anodyne Budget 2018 with no IR35 reform whatsoever has been raised.

Advisers on IR35, unnamed press sources and comments by the hard-line European Research Group all suggest that a bland, inoffensive Budget is due because of Brexit.

In particular, stalemate on Britain’s departure from the EU may mean chancellor Philip Hammond is unable to make many of the bold moves that he or his Treasury wanted.

'Vote down'

The unnamed sources’ thinking is that unveiling bold policy is unworkable, as a Brexit ‘deal or no deal’ casts two very different fiscal pictures which Mr Hammond cannot draw.     

And just one big policy change (IR35 reform would upend a law in place since 2000), could be enough for hard Brexit-supporting MPs to vote down the Budget unless they get their way.

The ERG has indicated exactly that, threatening to the Sunday Times that MPs will vote down Budget motions (IR35 reform was recently described as ‘inevitable’), to stop them becoming law.  

'Spring Statement 2019'

The safer course for the chancellor is to put little of provocation in his Red Book, thereby giving MPs no grounds to sabotage it, and instead reform IR35 at Spring Statement 2019.

That would undermine Mr Hammond’s showpiece move in 2016 to ban big tax changes in March, yet submissions for small, popular changes are now already doing the rounds for October 29th.

A call to increase the Annual Investment Allowance to £1million, for example, and a leaked plan to waive CGT for landlords when they sell to tenants with over three years’ tenancy.

'Little revealed'

A populist plan to hit digital giants over their perceived inadequate tax payments to HMRC has also surfaced, and notably with more detail than when it has been envisioned before.

Combined with the signs that Brexit will still be ‘in the air’ after this month’s Budget, it all smacks to one IR35 adviser of private sector reform looking destined for the shelf.

“With regard to Brexit, there may be little revealed by the Budget, as apparently there will be a further meeting in November,” said Qdos Contractor.

So “one wonders how far reaching this year’s Budget will actually be, given such uncertainty. For this reason alone, HMRC may decide to delay implementing further reform of the IR35 rules due to the effect this could have on the economy.”

'Intent'

The only caveat, added Qdos CEO Seb Maley, is that given HMRC is yet to issue a ‘Summary of Responses’ to the IR35 consultation, such a summary could be published “close” to the 29th.

The former tax inspector said publishing it this way before the Budget “would not be unlike” the Revenue, and is his hunch “if they are intent on pushing through” the IR35 reform.