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New UK Chancellor pledges soft approach for first year of IR35 reform – but critics aren’t convinced

If one major change above all others has been dominating conversation among contractors in the UK lately, it is the looming reform to IR35 rules set to take effect from 6th April. The shake-up has been criticized by many as potentially catastrophic for the situation of the country’s independent professionals.

So, what difference has the British government’s appointment of a new Chancellor of the Exchequer – Rishi Sunak, following the resignation of predecessor Sajid Javid – made to many UK contractors’ hopes of the IR35 changes being delayed or even cancelled altogether?

The short answer is: seemingly not much. Sunak has promised “tweaks and improvements to make sure the transition is as seamless as possible”, while adding that HM Revenue & Customs would not be “heavy-handed” in the first year of its implementation of the new rules. However, industry observers have expressed widespread skepticism about what his remarks could mean in practice.

“An appropriate and fair thing to do”

Speaking at a recent event in Birmingham, Sunak backed the government’s stance of proceeding with the controversial changes. He did, though, suggest that tax officials would initially take a soft approach to their enforcement of the new rules, “to give people time to adjust… which I think is an appropriate and fair thing to do.”

The essence of the reform is that whereas it was previously up to contractors and freelancers to set their tax status, this will now be the responsibility of the medium and large businesses using such individual professionals’ services.

While Sunak defended the government going ahead with the changes – arguing that “we’ve always had a law which means that you should pay the taxes for the type of work you have” – a number of big companies have already said they will cease to hire contractors as a consequence of the reform.

Sunak’s words met with hostility from independent professionals

Much of the reaction to the speech from the workers who Sunak was seemingly trying to placate was hardly warm. One contractor accountant told the ContractorUK website, for example, that “there’s no point in a soft landing. If they’re worried about implementation, then delay.”

Meanwhile, Contractor Calculator CEO Dave Chaplin was even more scathing, declaring that the new Chancellor “holds up a naked flame. With one fell swoop on 6 April 2020, he could reduce the UK’s flexible workforce to ashes.” He added, however, that “it’s not too late to blow out the match. Make the right decision, Rishi.”

Andy Chamberlain, deputy policy director at the Association of Independent Professionals and the Self-Employed (IPSE), commented: “The fact HMRC are apparently planning to give these changes a ‘soft landing’ suggests they are starting to understand just how damaging and disruptive they will be for business and contractors alike.”

We’re always available at the other end of the phone

Would you like to discuss with our own accountants and advisers here at Link Global Management, how you can best navigate the changing legal landscape in whichever part of the world you may be contracting in 2020? If so, you are welcome to enquire to our professional employment organization, whether by sending us an email or calling +44 (0)203 829 7221.

 

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