Reversal of IR35 reform at Spring Budget 2023 all but ruled out

Jeremy Hunt won’t change IR35 reform at Spring Budget 2023 because prime minister Rishi Sunak, his boss, is the chancellor who introduced it.

Moreover, HMRC is now actively probing the April 6th 2021 changes to the Intermediaries legislation, further positioning an IR35 reform U-turn by Mr Hunt as a very outside bet.

'Next to no chance'

Indeed, there is “next to no chance” that the chancellor will scrap a reinstatement of the off-payroll rules which he made just 19 weeks ago, freelancing body IPSE told ContractorUK.

ReLegal Consulting believes Mr Hunt might not even mention IR35 in his March 15th statement, as the law firm “can’t see” the Treasury boss “making any changes” to the rules.

Qdos agrees, with the IR35 contract review firm saying it would “be surprised” if Mr Hunt undid a framework that his boss, Mr Sunak, “pressed ahead with” when he occupied No 11.

'Self-employed getting a very bad deal'

But that isn’t stopping the firm from echoing the call of Sir John Redwood, who used a recent Sky News interview to say both IR35 frameworks should be rolled back at Budget 2023.

“We should reverse the 2017 and 2021 changes,” the Tory backbencher said, referring to the public and private sector off-payroll rules. “The self-employed are getting a very bad deal.

“We want to promote more self-employment – make it easier for people to get into self-employment. That is the quickest way to expand capacity.”

An organisation that specialises in contractor compliance, Professional Passport, doesn’t want half-measures on IR35 either.

'CEST must be ditched'

“The off-payroll legislation and CEST have caused mayhem for the contracting workforce and hirers who have been unfairly penalised as a result,” it began.

“HMRC needs to hold up its hands and admit that CEST is flawed, has been an abject failure, and must be ditched.”

But even such a call for an outright cancellation of CEST, issued by the organisation’s CEO, is a tacit acknowledgement that the reform invariably isn’t going anywhere.

'New CEST platform'

“I don’t expect IR35 to make an appearance on the chancellor’s agenda,” confirmed the CEO, Crawford Temple. “[But…]a long hard look at HMRC’s CEST tool [is overdue].”

Temple might not be totally disappointed on March 15th, as the Revenue has acknowledged it is looking at a “new platform” for its IR35 status testing tool.   

Backing the idea of improving IR35 reform from a taxpayer perspective is ReLegal Consulting boss Rebecca Seeley Harris.

'Work with what we've got'

A tax lawyer and author of CEST Explained, Seeley Harris says that in the likely event of no headline changes to IR35 reform in 14 days’ time, “we have to work with what we have got.”

This ‘make-do-and-mend' approach is potentially the only option, because the lawyer says she has heard that “HMRC are starting to investigate the private sector.”

Qdos’s operations director Nicole Slowey confirmed last week: “HMRC is contacting more firms about their IR35 compliance.

“In recent months, there has been a noticeable rise in the number of businesses that have received letters from HMRC regarding their IR35 processes.

“These letters often ask for information on the number of contractors engaged and how IR35 status is determined, along with more technical requests.

“It means the tax office is now actively policing compliance in the…energy, technology, financial services and construction [industries].   

'Rolling out IR35 training'

But a rollback of the off-payroll rules wouldn’t just waste HMRC’s resources.

“We've [this week] been rolling out IR35 training to our hiring managers”, wrote talent acquisition manager Clare Tempest, of supermarket giant Asda.

Taking to LinkedIn, Tempest added: “We’re trying to ensure that managers…know the difference between inside and outside and how they should onboard and manage outside IR35 contractors.”

'Reasonabe Care implementation'

Advisories on IR35 would similarly have their work with “agencies and end-clients” unpicked if the off-payroll rules were rethought again by Mr Hunt on March 15th.

Alexander Jackson, at Kingsbridge, identified nine examples of “reasonable care” which he said in an online update that both types of business have been “implementing”.

And it’s probably time well-spent, given that the framework looks as in place as the chancellor who reinstated it, and the chancellor who introduced it.

'Changing tack'

The policy director of the Association of Independent Professionals and the Self-Employed (IPSE), Andy Chamberlain, told ContractorUK: “We’d love to say we are hoping for a dramatic turnaround on IR35, but in truth there is next to no chance of that.

“Rishi Sunak and Jeremy Hunt have clearly set out their position on that issue and it’s very difficult to see them changing tack anytime soon.”

Qdos chief executive Seb Maley isn’t giving up -- mainly in the hope HMRC might do some of the changing tack, yet he too can’t see it coming from the top.

Mr Maley told ContractorUK: “Reversing IR35 reform would be the fair and logical thing to do. However, when it comes to IR35, the government has anything but fair and logical. Its head has been buried in the sand for years.

“[But that] shouldn’t stop us from calling on the government to address the issues which plague IR35 – from doing more to stop non-compliant blanket IR35 determinations to deterring risk-averse strategies adopted by businesses.”