Doubts grow over Hammond’s readiness to reform IR35 at Budget 2018

Signs that the government is not ready to reform IR35 at Budget 2018 are growing.

Firstly, the DUP has joined the ERG by saying its MPs – whose support the minority government relies on – would also vote down the Budget if Brexit does not go their way. 

That means divisive measures like IR35 reform are more likely to be omitted by chancellor Philip Hammond, in the hope that would-be rebel MPs have less grounds to object.

A voted down Budget not only means measures within fail to pass, but also, it can lead to the government’s collapse, should it face a ‘no confidence’ vote in the House of Commons.

'Considering'

But it is a minister’s answer to a question in the commons which is the second sign that reforming IR35 on October 29th is a task the government is not up to.

Peter Kyle, Labour MP for Hove, asked the Treasury what submissions Mr Hammond has received on the “potential extension of IR35 off-payroll tax to the private sector.”

In reply, Treasury minister Mel Stride said that the government was -- still, “considering the responses”. He also said the government’s formal response would be issued “in due course.”

Far from definitive, the minister’s answer this week does not say the response will be published at the Budget, which is written and agreed well in advance of Budget month itself.

Mr Stride will now surely face criticism if Budget 2018 does unveil IR35 reform, as it would suggest that, as the Treasury’s number two, he knew about reform yet chose not to disclose it.

'Checking it's working'

The third sign that the government is ill-prepared to announce IR35 reform this month is from HMRC activity. And it suggests officials may not even be at the consideration stage.

In fact, the department is still writing letters to public bodies asking how the 2017 reform is going; what impact on rates it is having; how attrition has fared and if CEST is being used.

“Some might say that there are checking it’s working OK,” said EY’s associate partner John Chaplin, who disclosed the contents of the letters online.

“[These HMRC] letters to  public sector bodies…[also ask] how long it takes to fill roles; have there been any disputes [and] have you moved to an outsourcer.”

HMRC was unable to comment at the time of writing on the letters, which indicate the taxman is still at the analysis stage of the April 2017 framework, and not at extending it.

'Respite'

A BBC news story yesterday hinted otherwise, yet it only restates what has been known since April 2017 (and before); that IR35 reform “could be announced at this month’s Budget.”

Intouch Accounting, a contractor accountancy firm, is opposed to such a move. “Given the existing Brexit-driven pressure on the UK economy, arguably the most sensible decision by the government would be to delay IR35 reform until 2020.”

In a statement, the firm also told ContractorUK: “Businesses would benefit from this respite and HMRC would have more time to create a new, fit-for-purpose approach to private sector compliance.”