Government continues ‘War on Contracting’ with Budget publication of the IR35 Off-Payroll Tax roll-out despite evidence of huge damage
As expected, despite no mention by the new Chancellor Rishi Sunak, the Government confirmed that it still intends to roll-out the flawed IR35 legislation to the private sector in April, despite all the evidence showing the huge damage it is causing and despite the country facing the Covid-19 outbreak and huge pressure on business and the public purse.
The Chancellor failed to make any mention of the anti-business measure in his budget speech, but the following section has now been published in the Treasury Copy of the Budget Report. On page 88 it states:
2.178 Review of changes to the off-payroll working rules (commonly known as IR35) – At Budget 2018 the government announced that it would reform the off-payroll working rules in the private and third sectors from April 2020. The government has recently concluded a review of the reform, and is making a number of changes to support its smooth and successful implementation. The government believes it is right to address the fundamental unfairness of the non-compliance with the existing rules, and the reform will therefore be legislated in Finance Bill 2020 and implemented on 6 April 2020, as previously announced.
This paragraph gives a deeply misleading impression of the so-called ‘review’, which was in fact merely a tick-box HMRC consultation on the implementation of the reform, not a review of the reform itself, as stated here. This misrepresentation follows the fact that the previous Chancellor had promised a review of IR35 legislation during the election campaign, as part of a proposed review into self-employment, which is yet to take place. Disappointingly, this promise was reneged on in January and the consultation on implementation presented by Ministers as the same thing, when it is clearly not.
It also fails to mention that once again, HMRC and the Treasury are ignoring evidence of the clear damage that the measure is already doing – and brushing under the carpet the fact that the impact is very different from what they predicted in their flawed impact assessment. Already many large companies are laying off contractors and according to HMRC’s own figures, at least 150,000 thousand contractors will face a pay cut of up to a quarter, pushing some into financial difficulty. Firms are unlawfully seeking to avoid additional employers’ taxation and instead are pushing this onto the worker, through intermediaries and much lower pay rates. At the same time, workers are being pushed into ‘Zero Rights Employment’, being forced to pay taxes as employees but with none of the rights or security of employees, having no sick, holiday or maternity/paternity pay and no pension contribution. All of this is happening, yet Ministers are misleading Parliament that firms are not issuing blanket determinations of all workers as ‘inside IR35’. Some large firms are avoiding the Off-Payroll Tax altogether, by moving work to other countries, meaning a loss or jobs and tax to the UK.
The contacting sector Stop The Off-Payroll Tax campaign are now calling on contractors up and down the country to visit their MP and urge with them to push for changes to the Finance Bill to stop the decimation of the UK’s contracting and freelancing sector. To sign up to be a free supporter of the campaign, campaigners just have to email email@example.com.
During the election Stop The Off-Payroll Tax campaigners lobbied election candidates asking them to back the candidate commitment to oppose the Off-Payroll Tax roll-out. The commitment was also supported by Conservative candidates, now elected to Parliament Some key Conservatives have backed the call to stop the Off-Payroll Tax including John Redwood, Nigel Evans, Crispin Blunt, Philip Davies and Julian Sturdy, Greg Smith and Mark Jenkinson, the new MP for Workington.
Commenting, Dave Chaplin, Director of the Stop The Off-Payroll Tax campaign and CEO of ContractorCalculator said:
“It is disappointing, but not surprising,. that the Chancellor is intent on continuing the War on Contracting and is planning to implement the roll-out of the discredited and damaging IR35 ‘Off-Payroll Tax’.
“Pushing ahead with the Off-Payroll Tax roll-out is absurd at this crucial time, with the country facing the outbreak of Covid-19, Brexit and huge pressures on business that both of these will cause.
“The Stop The Off-Payroll Tax will continue to campaign and to work with pro-business MPs who know the damage this utterly ill-considered policy is doing to the UK’s skilled flexible workforce and to business. So we urge all contractors and freelancers and others affected to keep campaigning as we push hard for changes to at least to soften the blow and change the proposed legislation. We also expect all those MPs who promised constituents they would oppose the April roll-out to actually do so when it comes to the Finance Bill and we will hold them to account to keep their word”.