Contractor sector sceptical over Sajid Javid's vow to review IR35 reform

A pledge by Sajid Javid to review 2020’s changes to IR35 has backfired by irking contractor-voters ahead of general election 2019, rather than ingratiating himself or his party with them.

Despite once backing a repeal of the rule (albeit before he entered politics), Mr Javid and his pledge have come under fire for what is being widely seen as his attempt to win Tory votes.

His vow to review the changes follows near-identical pledges by the Lib Dems, Labour, and the SNP, which have all either said they would review or repeal the changes.

'Javid didn't show much grasp of IR35'

But the chancellor is not only facing charges of political opportunism.

He also stands accused of not understanding the rule, or the plan to reform it even though his own party is behind it.

“He didn’t really seem to have much of a grasp on what IR35 is, saying that it applied to the self-employed ‘not all but many, especially consultants,’” explains Re Legal Consulting.

“And [he said the reform review] would be part of the wider review into the self-employed but, it is an entirely distinct piece of legislation that doesn’t affect the self-employed.” 

'Haphazard approach'

The status advisory’s Rebecca Seeley Harris added of Mr Javid’s comments, made to a BBC Radio 4 programme: “[He’s taking] a very haphazard approach to a very serious situation.

“Announcing a review on Money Box, just weeks before an election and only months before the [reforms] take effect. Many businesses have spent a lot of time and money preparing”.

Asked on the programme whether a review meant he was now ‘putting off’ the scheduled start date of April 6th 2020,  the chancellor replied: “I don’t want to pre-empt the review.”

Qdos Contractor reflected: “A review of IR35 changes is certainly a sign of progress, [but] reform is still set to be enforced in April 2020.”

“Given the Lib Dems have been praised by contractors for promising a review…you are left to wonder if this is why the chancellor has…[pledged a review even though it is] absent from the Conservative Party manifesto.”

'Lib Dems started the domino run'

Patrick Gribben, head of client services at Intouch Accounting confirmed yesterday: “There is no mention of a review of the proposed IR35 reforms in the Conservative manifesto. 

“It seems to me that the Lib Dems started the domino run when they did include a promise to review the reforms and that other parties -- not wanting to lose ground with potentially millions of voters -- have followed suit.”

The contractor accountant also told ContractorUK: “And a review is just that -- there is no commitment from Mr Javid, or anyone else at this stage to take any firm action. 

“Surely, it must be necessary to at least suspend the rollout of reform to the private sector in April 2020 to allow time for a full fact-find and review, before analysing the results and deciding on an outcome?”

'Suspend it immediately'

Chris Bryce, chief executive of the Association of Independent Professionals the Self-Employed (IPSE) gave an emphatic ‘yes’ answer.  

“The Conservative Party should announce an immediate suspension of the proposed April 2020 rollout, pending the review's final report.

“[Treasury minister] Jesse Norman or even [prime minister] Boris Johnson could also announce this," he said. "It makes sense to suspend IR35 prior to the review's outcome.”

'Delays don't really work'

But it’s a ‘no’ answer from Stuart Marquis, who helps recruiters with tax, employment and compliance.

“Getting another 12 months to prepare doesn't really work,” he argued.

“Remember that this has already been delayed by 12 months and was originally due to come into force in April 2019, so stakeholders have already had circa 18 months plus to get ready for this. In my experience, nobody properly takes advantage of delays and uses them as extra time to prepare

Writing on LinkedIn, the former Liberty Bishop employee also said: “All that these political ‘promises’ for review will achieve is to further confuse the market and lead stakeholders into a false sense of security that [reform of the] off-payroll [rules] might not happen. These ‘promises’ will almost certainly amount to nothing.”

'Clearly struck a chord'

Contractor Alan Watts was more optimistic in his online post. “It's not the MPs of either party we should be blaming here,” he began.

“It's clear from history that the Treasury civil service have been advising that IR35 needs to be retained; that the public sector rollout would bring in a £0.5bn in extra tax and that extending it to the private sector would bring in a lot more.

“All the campaigning by various groups, including IPSE, has clearly struck a chord, since no minister would bother mentioning a fairly arcane tax on mainstream radio”.

'Make sure the proposed IR35 changes are right'

In his radio interview, Mr Javid said the review of IR35 reform would run as part of the party’s manifesto-pledged, general review to better help the self-employed, to “make sure the proposed [IR35] changes are right to take forward.”

At Re Legal Consulting, where Mr Javid’s comments on Saturday are regarded as “pure electioneering,” the changes are far from right to take forward.

“This is a very poorly drafted piece of legislation,” Ms Seeley Harris says. “It will hit businesses hard.  At times of economic instability we need a flexible workforce, now more than ever, and the government is just about to cut that off at the knees. 

“It is appallingly misjudged of HMRC to think that this is not going to severely affect the private sector.”

'Rightly derided'

And if the chancellor’s promised IR35 reform review is left to the judgement of HMRC, or HMT, contractors implied last night they would be massively disappointed.

Yet not surprised. “Look at all the concerns regarding the Loan Charge Review and the initial March ‘sham’ review by the Treasury -- it was rightly derided,” tweeted one contractor.

“Trust has gone when it comes to them and HMRC, especially as they carry on regardless.”

So the review must be “proper”, in the words of JSA Accountancy,-- a call that has been echoed by other contractor tax advisories like Intouch and Gorilla Accounting.

If it is ‘proper’(i.e. both comprehensive and independent), then the review indicates Mr Javid’s pledge is “a genuine promise from a government that acknowledges the [potential] impact of IR35 reform.”

'Desperate, last-minute'

This is one of three ways to interpret the chancellor’s vow to look at whether the incoming IR35 changes are correct, says Qdos Contractor’s CEO Seb Maley.

Alternatively, it is: “A desperate and last-minute attempt to win back the trust of contractors,” or he said, (but potentially ‘and’) “a belated reaction to the Lib Dem and SNP manifestos that say the same thing.”

As they can’t work out which until it’s probably too late, Mr Watts believes that PSC contractors have an important job to get on with.

Referring to end-users ranging from telco Vodafone to insurer Royal London, he said: “We [as contractors] should be focussed on educating clients that they are going to lose out big time by insisting on the ‘safe’ option of blindly dumping everyone ‘inside’ [IR35].”