Contractors’ advisers urge caution on IR35 after Sajid Javid quits as chancellor

The shock resignation yesterday of Sajid Javid as chancellor should not make contractors and others facing IR35 reform “take their foot of the gas of preparations” for April 6th.

The consensus from experts implies a case of ‘the devil you know’ as Mr Javid was critical of IR35 having called it “silly,” whereas the views of his successor, Rishi Sunak, are much less known.

But the ‘keep preparing’ advice relates more to there being little room left in the calendar to delay Budget 2020, where the legislation to implement the changes to the off-payroll rules is contained.

'Sunak knows IR35 reform's impact'

Tom Wallace, head of tax at HMRC dispute advisory WTT Consulting says: “Speculation around the Budget now not going ahead [is understandable].

“But it being so close to the new tax year due to the December election means I don’t think it can be delayed by any significant amount of time.

“Instead, Rishi Sunak would do well to focus on the elements causing most disquiet such as the Loan Charge and IR35. I do know he’s well aware of both, and the impact they are having.”

'Things now even more uncertain'

Timing troubles Charlie Cox, commercial director at SThree, too.

“As if releasing the Budget just 21 working days before the proposed private sector reform go-live date wasn’t bad enough for UK businesses and contractors.

“Yesterday’s news of chancellor Sajid Javid resigning from his post only 18 days ahead of the Budget makes things even more uncertain.”  

But if Mr Sunak has a “strong position against” IR35 reform, and has seen “the damage it is inflicting on UK Plcs and PSCs,” then he could orchestrate a “mix-up,” Mr Cox also said.

'Will the new guy have backbone?'

A former tax officer, Carolyn Walsh, is less convinced.

But the boss of Andraste Accounting says any change to the IR35 reform timetable is more likely to come at Mr Sunak’s behest, than the IR35 Reform Review.

“The only thing is a new chancellor would need time to be advised on and understand the legislation from 2000, and now the 2020 draft legislation to change the one from 2000.

“And the change is thanks to the government, which presumably Boris Johnson upholds as PM. So the big question is,” she said, “‘Will the ‘new guy’ have the backbone to do anything?’”

'Targeted tax raids now more likely'

Analysis from investment advisory Hargreaves Lansdown indicates that Mr Sunak won’t.

Or can’t, according to the advisory’s head of policy Tom McPhail.

“Given the new chancellor’s relative lack of a power base and rapid ascent of the political ladder, the forthcoming Budget will probably be more of the prime minister’s making than would otherwise have been the case.

“This increases the likelihood of a bold Budget with populist spending announcements. The trade-off is it probably also increases the likelihood of targeted tax raids to pay for the PM’s largesse,” he said.

'Don't bank on a last-minute rethink'

Yet Mr Sunak, chief secretary to the Treasury until yesterday (a position he held for just seven months), should not pay too much attention to his more established political colleagues, hopes IR35 status firm Qdos:

“With IR35 reform rapidly approaching, it’s vital that Rishi Sunak succeeds where Sajid Javid failed. We urge the new chancellor to act immediately and halt the introduction of needless and short-sighted changes to the off-payroll working rules.”

However, the firm’s CEO Seb Maley knows that there are no guarantees.

“Contractors and private sector firms cannot hang their hopes on a last-minute rethink, even if scrapping IR35 reform is the sensible thing to do.

“Businesses must work off the basis that changes will be enforced and should continue their preparations.”

'A new broom at HMT might sweep clean'

Graham Jenner, boss of accountancy services provider Jenner & Co agrees. He told ContractorUK:

“It’s tempting to think a new broom at HMT might sweep clean with a new stance on IR35 reform. But PSCs and others shouldn’t take their foot of the gas of April 6th preparations.”

Last night, the ‘Stop IR35’ campaign said it had sent a re-nosed ‘delay IR35 reform’ letter to No 11 Downing Street, to reflect the change of personnel at the top. That change reportedly came about after Mr Javid refused to sack a string of his special advisers who Mr Johnson wanted gone.

'A line in the sand, hopefully'

James Poyser, CEO of inniAccounts, who also wants to see reform delayed until April 2021, hinted that the contractor industry is witnessing a delicious irony.

“No one likes to see someone resign over a disagreement that could be resolved with constructive dialogue -- a situation thousands of self-employed people face right now.”

He added: “We have to hope this is a point to draw a line in the sand, put a cross department team together, and halt the reform to give the self-employed fair assessments and employment rights.

“The consequences of not doing so are stark – a £2bn productivity gap in the first month of the [new tax] year, industry projects going off the rails, and lives genuinely at risk.”