IR35 at the centre of election pledges

The Chancellor of the Exchequer Sajid Javid has promised a review of controversial IR35 legislation.

Javid made the commitment on Radio 4’s Money Box last week. He said: “One thing in particular that I want to look at again are the proposed changes to IR35. I want to make sure the proposed changes are right to take forward…I think it makes sense to include the proposed IR35 changes in that review.”

A review is not included in the Conservatives’ manifesto and his comment comes after Labour’s shadow small business minister said he would halt IR35’s roll-out to the private sector next April, only for his tweets confirming this to be removed later.

Bill Esterson told the Freelance and Small Business Debate, organised by self employment experts IPSE (the Association of Independent Professionals and the Self-Employed), Enterprise Nation, ICAEW, TEN and COADEC: “We absolutely can’t see it rolled out into the private sector the way things are at the moment.”

Asked later by IPSE to confirm it was Labour Party policy to review IR35 and not roll the changes out to the private sector in April 2020, Esterson tweeted: “absolutely”. However, since then all tweets about the matter have been removed. The Labour Party manifesto makes no mention of IR35, but instead calls for the ending of bogus self-employment and the creation of a single status of ‘worker’ for everyone apart from those genuinely self-employed in business on their own account. Business experts are keen to see more details on how this would work.

The Lib Dems have also pledged to review IR35 reform and to scrap the retrospective element of the loan charge, another measure intended to tackle tax avoidance.

At the event, Esterson also said: “We need to support the self-employed in this country. We need to make sure that our tax system is diverse so that it matches the needs of being self-employed and is also consistent with the risk that is taken.”

IPSE says it welcomes pledges to review IR35, but, like many, is cautious about their impact on the roll-out of the legislation to the private sector planned for next April. It has warned parties that they must also pledge to halt that.

Andy Chamberlain, Deputy Director of Policy at IPSE, said: “When the changes to IR35 were introduced in the public sector, they not only stifled freelancers, but worsened staffing problems for the NHS and many other essential public sector bodies.

“Now, as April 2020 approaches, major banks and businesses – vital drivers of the UK economy – are starting to panic at the plans to extend the changes to the private sector. Some are even telling their contractors they must join as employees or stop working for them altogether. Out of fear of these changes, they are destroying their flexible workforce.

“To prevent further damage, the parties must fully commit to halting the April 2020 roll-out. Freelancers and businesses must be reassured they will not be hit by these ill-conceived and hugely harmful tax changes in Spring.

“A review is a big step in the right direction, but it must also be a full, independent review that truly listens to freelancers and the businesses that rely on them.”

IR35 legislation is aimed at clamping down on disguised employment, people who are paid as contractors for doing work that an employee would normally do, but there is a lot of concern that employers will choose simply not to use contractors rather than figure out what their employment status should be.

A survey by IPSE shows freelancers’ confidence in the economy is the lowest on record because of concerns about the economy, Brexit and IR35. According to the freelancer Confidence Index, confidence in the economy has fallen to historic lows both for the coming three months and the coming 12 months. Freelancers’ confidence in their own businesses has also dipped to a record low. However, despite this freelancers are working more and earning more than last quarter by charging higher rates. IPSE speculates this may be to prepare for what they expect to be difficult times ahead.

Meanwhile, recent data from the Recruitment and Employment Confederation (REC) shows a fall in UK employer confidence to its lowest level in over three years. The confidence level in the economy fell from minus 31 in October to minus 34 in November, the worst level since records began in 2016. However, significantly more employers were looking to increase rather than decrease their permanent staffing, but were being held back by political and economic uncertainty.

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