Contractors ‘shouldn’t mistake a Budget delay for an IR35 reform delay’

Contractors are being cautioned that the chancellor’s snap decision on Friday to cancel Budget 2019 does not dictate a delay, much less a cancellation, to April 2020’s IR35 rules.

Reacting to Sajid Javid saying his debut Budget will now not go ahead on Nov 6th, the CEO of the FCSA said she “can’t help thinking” that the UK government “will still get it through.”

“The legislation [to implement the changes to IR35] is drafted, and there needs to be some sort of finance bill so the government can still collect taxes,” said the FCSA’s Julia Kermode.

She conceded that with a general election pencilled in for Dec 12th, and Brexit-day currently heading towards Jan 31st, it now looks “unlikely” there will be a Budget before Spring 2020.

'Unacceptable'

In his announcement, Mr Javid did not give reasons for scrapping (and not rescheduling) the Budget, but he did mention both the UK going to the polls and the delay to leaving the EU.

Wes Streeting, a Labour MP said: “The cancellation of the Budget without a proper explanation is unacceptable.

“Sajid Javid must appear before the Commons Treasury [Committee] as a matter of urgency, and the OBR should be asked to publish their forecasts for proper public scrutiny”.

'Knee-jerk decisions'

According to Brookson Legal, neither an election nor the Brexit delay adds up to the IR35 legislation being shelved or scrapped.

But a pre or post-Christmas Budget could cause unwanted complacency.

“This decision [by Mr Javid] could spark [firms] to delay their preparation, which itself may well lead to a last-minute scramble and inevitably see businesses take knee-jerk decisions”.

The law firm’s Matt Fryer also said such decisions harmed both PSCs and those engaging them, yet, sounding sympathetic to the latter, he acknowledged that IR35 is “complicated”.

'Months more uncertainty'

Nevertheless, “delaying the Budget is bound to cause uncertainty at a time when many businesses have rightly started to make necessary preparations for…April 2020.”

“Unfortunately,” he added, “the current lack of clarity is unhelpful for the businesses that rely on a flexible workforce and contractors whose livelihoods depend on it.”

Chris James, head of accounting operations at JSA Services, sees it similarly. He spoke of a delayed Budget meaning “months more of uncertainty for contractor supply chains.”

'Banks going ahead, regardless'

An upside of the Budget being pushed back to beyond the sought-general election in December is that it will now no longer precede the conclusion of the Loan Charge Review.

This should relieve a tax inspector-turned-adviser who was concerned that Mr Javid would be making tax law for the years ahead, without knowing Sir Amyas Morse’s recommendations.

But the adviser, Carolyn Walsh, now believes that contractors should be more concerned about what the actions of banks are effectively telling her old boss.

And she implies it’s another reason why private sector IR35 reform won’t be derailed even if the Budget has been.

“By choosing not to make any IR35 determinations, banks will make the government think that the introduction of IR35 reform was perfectly correct.

 “If hirers are now more or less saying that they’ve been hiring contractors incorrectly for years,” Walsh says, “what message is being sent to HMRC and the government?”

'Won't make much difference'

Regardless of the message, and even regardless of any impact of the postponed Budget on the 2020 rules, some banks say they will enforce their policy changes for PSCs no matter what.   

So in the words of one ContractorUK Forum user, “it won’t make much difference” if the Budget does delay or ditch IR35 reform by being late, as bans on PSCs will still often be stuck to.

Another PSC agreed that a new IR35 is still incoming, by pointing out that the civil servants and Treasury staff who back IR35 reform will remain, even if the current government does not.

Separately, and although made before Mr Javid’s decision, an online call to action by IPSE may encapsulate it best: "We’re still fighting against IR35, but [PSCs] should prepare for April 2020’s changes."

Tax consultant David Kirk, who specialises in employment status confirmed last night to ContractorUK: "I’m pretty sure that the delay to the Budget won't lead to a delay to the IR35 reforms. The measure is in the system and the system isn’t about to throw it out."