Chancellor Promises to be ‘Fair’ over IR35

The new Chancellor of the Exchequer has promised that tax officials will not be “heavy handed” over the introduction of changes to the rules on off-payroll working, whilst giving a speech in Birmingham on the 22nd February.

He has, however, stated that the government will go ahead with reforms that have caused controversy among 230,000 freelance contractors and a large number of companies across most sectors within the UK.

The Chancellor stated, “I have spent time with HMRC to ensure they are not going to be at all heavy handed for the first year to give people time to adjust, which I think is an appropriate and fair thing to do”. He also added that the current government review “will have some tweaks and improvements to make sure that the transition is as seamless as possible”.

The review is not yet complete and the changes will be implemented on the 6th April 2020, however these changes have not yet been passed in parliament.

What does this ‘softly, softly’ approach mean?

Currently, HMRC estimate that only 1 in 10 contractors within the private sector paying tax under the current rules are doing so correctly, and that the changes will recoup £1.2 billion a year by 2023. Therefore, it seems certain that the rules will be implemented in full.

The Chancellor, during his speech, continued, “Nothing has changed in the law. We have always had a law which means that you should pay taxes for the type of work you do. What has been clear is that for a long time, those laws have not been followed. Some people, unfortunately, were operating in a way which meant that they were not paying the taxes they should have been because, essentially, they were employees but were being taxed as though self-employed”.

“It is not fair to the people who were employed that someone else could be doing the same job and paying less tax, and ultimately, that tax pays for the NHS, social care, and everything else. So, it is right that that unfairness is corrected and that is going to mean change for some people”.

The Chancellor has made it clear, therefore, that the changes are coming and it is vital that you are prepared, whether you are a self-employed contractor, a recruitment agency or a hiring organisation. The problem, however, is that many organisations and individuals are not.

If you would like more information about the changes to the legislation and how they may affect you, contact CK Group.

IR35 legislation