Parties Promise IR35 Review

The Lib Dems, Labour, the SNP, the Green Party and the Conservatives have all promised to review the roll out of IR35 reforms to the private sector if they are elected to power. The Lib Dems were the first to include a pledge within their manifesto on the November 20^th, with the Conservatives latecomers to the party on November 30^th.

On Monday, Labour’s shadow small business minister, Bill Esterson, told attendees at the Freelance and Small Business Debate organised by the IPSE that the party would call a halt to the IR35 reforms. He later confirmed this as policy, although Labour’s manifesto contained no mention of the pledge.

Asked to clarify the party’s position, Esterson subsequently modified his comments, saying that the Labour Party is not planning to halt or scrap plans to extend the reforms to the private sector, but will conduct a review. He added, “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.”

The Conservatives were the last to commit to a review, while taking a similarly cautious approach. Having previously confirmed that the reforms would go ahead despite delays to the budget, their manifesto, published on the 24^th November, made no mention of IR35. One week later however, following pledges from the opposition, they announced that they would hold a review of the legislation.

Mr Javid said: “I want to make sure that the proposed changes are right to take forward. We’ve already said that we’re on the side of self-employed people. We will be having a review and I think it makes sense to include IR35 in that review.” What’s not yet clear is how this review will impact on the planned April roll out in the private sector, with many contractors hopeful of a reprieve.

Although it’s encouraging that the election looks set to bring about an IR35 review, with five million freelance and contractor votes up for grabs, it remains to be seen if the parties will follow through on their campaign promises. With little more than a review on the agenda, the parties are being cautious when it comes to committing to anything more concrete.

This could be explained by several factors, including the fact that Treasury ‘machinery’ has already been set in motion for the reforms, independent of whichever party is in power. There’s also the question of the reforms already being active in the public sector, and what this would mean if the private sector roll out was revoked.

Dave Chaplin, director of the 2,000-strong ‘Stop the Off-Payroll Tax’ campaign group, seems to advocate caution in his recent LinkedIn post. He lists the Tories’ previous pledges to scrap IR35 in 2001 and again in 2010 following an emergency budget. Evidently the pledges went no further, with “improved administration” favoured as an alternative.

Whichever party wins the vote on December 12^th, Brexit is certain to dominate 2020. The economy will be a driving factor in negotiations, and this means that a broad view of IR35 should be taken. The potentially damaging effect on the buoyant freelance and contracting sector will hit British business hard. Although the government may see tax revenue as a quick fix for budgeting shortages, in the long term, pursuing IR35 reforms could be a false economy.

This content has been supplied by IR35 Guru.