Liz Truss pledges to review IR35

Liz Truss says she will review IR35 if she becomes prime minister.

The foreign secretary used an interview with Britain’s biggest newspaper to say the changes to the off-payroll rules in April 2021 were unfair on the genuinely self-employed.

She told The Sun that IR35 reform, introduced under then-chancellor Rishi Sunak – her rival for No 10, is wrongly “all about trying to treat the self-employed the same as big business.”

Truss may have been referring to the IR35 assessments that organisations now run needing to be conducted by contractors, where those contractors’ clients are neither mid-sized nor large.

'Tax system should reflect lack of rights for self-employed'

But she also reportedly took issue with the ‘zero-rights employment’ that a House of Lords inquiry has found that Intermediaries legislation reform has imposed.

“If you’re self-employed, you don’t get the same benefits as being in a big company.

“You don’t get paid holidays. You didn’t get those benefits,” Ms Truss was quoted by The Sun on Sunday as saying. “So the tax system should reflect that more.”

In October 2020, a House of Commons inquiry heard strong arguments against lowering tax for self-employed people solely because they go without employee-style protections.

'Differential'

In fact, the Association for Independent Professionals and the Self-Employed was the only one of four contributors to ‘Tax After Coronavirus’ to endorse a tax “differential” in return for fewer rights.

Writing this month for ContractorUK, the association said that if the next prime minister regarded revoking IR35 as “unpalatable,” then a clarification of the rules would suffice.

But last night, in light of Ms Truss’s reported IR35 pledge, the association’s head of policy Andy Chamberlain said everything was back on the table, including revoking the legislation.

'Delighted'

Mr Chamberlain told ContractorUK: “We at IPSE are delighted that Liz Truss has pledged to review IR35, should she win the Conservative leadership.

“These rules are destroying businesses and holding back the economy. While it is positive to hear Ms Truss acknowledge the need to look again at IR35, we have had reviews before and none of them have led to anything meaningful.

“This review must lead to radical and tangible change. Nothing should be off the table, including scrapping this dreadful legislation.”

'Crawl out this crisis'

Contractors have also been hoping Truss or Sunak would address IR35 -- especially, as one put it, “they both claim to support and need [company directors] to crawl out of this economic crisis.”

But now Truss has belatedly set out her stall on the off-payroll rules, affected workers are sceptical.

A Linux contractor reflected: “Isn't ‘doing a review’ political-speak for ‘we will form a committee, who will take a year or two to deliver the conclusions we provide…so we can pretend to be doing something?’”

'Vested interest in keeping IR35 going'

A project manager sounds similarly unconvinced, saying: “I assume she [Truss] will get the Treasury or a large consultancy to undertake the [IR35] review.

“[They] will report back [with] ‘No Problem,’ because both [the Treasury and large consultancies] have a vested interest in keeping IR35 going.”

Truss supporters would likely say that, as a former chief secretary to the Treasury (2017 to 2019), she has experienced the confusion and duplication IR35 has created.

In fact, the only IR35-related statement which Truss has made to the House of Commons was in July 2019, to confirm that the short-lived ‘assurance process’ was being “superseded”.

'Treasury orthodoxy'

A qualified chartered management accountant, Truss hinted yesterday that despite holding it for just two years, her position at HMT would be put to good use should she enter No 10.

“As prime minister, I will take on the Treasury orthodoxy”, she tweeted.

“[My aims are] to get more start-ups thriving, grow our economy and unleash opportunity here in Britain.”

International trade minister Penny Mordaunt, who is a former prime ministerial candidate, yesterday retweeted Ms Truss’s interview in which she pledges to review IR35.

Supporters of Ms Mordaunt (when she was still in the race for No 10) include former Brexit minister David Davis MP, a vocal critic of the off-payroll rules.

'More help for people and businsses'

Another veteran Tory known to dislike IR35 is John Redwood MP.

He went online yesterday to reassure that “of course Liz [Truss] will offer more help for people and businesses”.

Mr Redwood criticised the Treasury too, saying that for the last “two years,” No 11 has produced “wildly pessimistic” forecasts for both tax revenue and borrowing.

“If we carry on with Rishi's tax rises and forecast recession, we will get less tax revenue and end up borrowing more,” the veteran MP added. “Time to fight recession.”

'Big statement from IR35 reform overseer Sunak'

Seb Maley, CEO of Qdos, doesn’t sound like much of a Rishi Sunak supporter either.

“Rishi’s promise [is that] tax cuts are a case of ‘when’, not ‘if.’

“It’s a big statement from the ex-chancellor, who saw IR35 reform through in the private sector.

“[He also] raised dividend taxation and announced a corporation tax hike for 2023. With this in mind, would Sunak convince independent workers that he is the right candidate for PM? I have my doubts.”

But it is doubts over IR35’s implementation that is bothering others, despite the reforms being first introduced in the public sector almost five-and-a-half-years ago.

'Clients still really unsure on IR35 legislation'

Taking to LinkedIn earlier this month, Kevin Culverhouse, director at recruitment consultancy Stanton House said: “Do organisations really understand IR35 yet?

“[We’re] still seeing many organisations doing blanket inside determinations. [And we’re still] having lots of conversations with clients who are still really unsure of the legislation.”

But even some of the terms in Culverhouse’s post are likely to confuse and confound.

'Intermingled'

“There are two concepts…that get intermingled regularly, perhaps even by the House of Lords”, began HMRC dispute advisory WTT Consulting.

“An inside IR35 ‘blanket decision’ is not compliant with the legislation. It fails the ‘reasonable care’ test when making the status determination.

“However, that is not actually what most end-clients are choosing to do. The vast majority [in our experience] are actually making the decision to ‘blanket ban’ engaging any contractors”.

'Contract fully reflects working practices'

But WTT’s head of tax investigations Tom Wallace says that, actually, there is no need for either.

Primarily addressing medium-sized and large engagers, Mr Wallace further advised: “Put in place a fully functioning determination process; monitor the engagement regularly for mission creep, and ensure that the contract fully reflects the working practices.”

Sounding too fatigued to even consider doing any of that himself – should the ‘small company’ exemption apply to his client, one contractor posted on social media:

'Abolish IR35 to assist the country back to its feet'

“IR35 literally makes no sense [whatsoever]. And [so the legislation] should be abolished now, to assist the country to get back on its feet.”

But in a thread discussing a separate pledge by Ms Truss to roll back the in-force increase in National Insurance Contributions (should the former employee of telco Cable & Wireless and oil giant Shell become PM), a payroll specialist took issue with her:

“How do they [politicians like Ms Truss] think these things will actually work, in payroll? 

“Are we just miraculously going to roll back the payroll clock in software?"

'Made on the hoof'

The specialist continued: "We need legislation, consultation, specifications and time. Perhaps a bit boring -- and not a vote-catcher -- to talk about payroll software in a leadership election though.”

Likewise referring to her NI hike cancellation vow but equally capturing much of the mood since Ms Truss pledged to review IR35, a contractor offered: “It’s all just policy made on the hoof -- for their electorate. And not considered as it should be. Sigh."