Julia Irvine 3 Dec 2019 04:36pm

Chancellor commits to review of IR35

The chancellor of the exchequer has announced that the major review of all aspects of self-employment, promised in the Conservatives’ manifesto, will include the proposed application of the IR35 rules to the private sector from April next year

Speaking on Radio 4’s Money Box Election Special, Sajid Javid said that, as part of the review, he wanted in particular to look again at the proposed changes to the IR35 rules. “I value the work of consultants,” he said, “and I want to make sure that the proposed changes are right to take forward.”

When pressed by presenter Paul Lewis on whether this would mean that the implementation date might be deferred, he said he didn’t want to pre-empt the review. However, he emphasised the fact that the party had already made it very clear it was on the side of self-employed people and would be having a review. “I think it makes sense to include the proposed IR35 changes in that review,” he added.

IR35, which is anti-tax avoidance legislation aimed at contractors who supply their services to clients through an intermediary, such as a personal service company (PSC), who would otherwise be regarded as employees, has applied to the public sector since 2017.

The rules are being extended to the private sector from 6 April next year but with significant changes. In the past, contractors have been responsible for establishing their tax status and accounting for taxes themselves as necessary. In future the responsibility will pass to large or medium sized organisations that use contractors. Such organisations will also be required to inform the person they contract with of this status, as well as the contractor directly, where he or she needs to be paid through a payroll.

According to HMRC, the changes are likely to affect 170,000 people working through their own company, and up to 60,000 organisations that use workers employed by a PSC.

Since the details of the new rules emerged, the government has come under increasing pressure to rethink the issue. IPSE, which represents the self-employed, argues that IR35 is “flawed and unclear legislation” which unfairly affects the smallest companies – freelancers – many of whom have been falsely accused of “disguised employment” when in fact they are legitimately using a limited company.

“Worse, IR35 investigations can be long, intrusive and extremely costly for freelancers,” it says. “They can even cause reputational damage, and many freelancers expend large amounts of time and money protecting themselves from the risk of IR35 investigation.”

The Conservatives are not the only party to have promised a review of IR35. The commitment to do so have featured prominently in the manifestos of the Liberal Democrats, the SNP and the Green Party.