Home IR35 – What Is It And How Does It Affect You? Justice Minister says Tories will not revoke IR35 reform

Justice Minister says Tories will not revoke IR35 reform

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A Government minister indicated on Wednesday evening that, if elected, the Conservative party will not be cancelling the extension of IR35 reforms, otherwise known as the Off-Payroll rules, into the private sector.

Speaking on Eddie Mair’s “Election Call” on LBC Radio, parliamentary under-secretary of state for justice Chris Philp suggested that the Tories would not scrap the planned changes to IR35, if successful in December’s general election.

The call-in followed a surprise announcement by Labour on Monday night to commit to abandon the roll-out of Off-Payroll into the private sector – a move the Justice Minister called one of Labour’s “rather desperate stunts”, likening it to their £58 billion pledge to compensate WASPI women.

However, there appeared to be some confusion over the Justice Minister’s understanding of the Labour pledge – which was not included in their manifesto – as he referred to Labour’s plans as the “abolition” of IR35.  Labour’s commitment did not go that far, merely promising to halt the extension of controversial IR35 reforms.  After telling the caller, a contractor from Manchester, that he didn’t think the Tories would follow Labour in having a “blanket abolition” of IR35, he went on to suggest the contractor use HMRC’s online CEST tool, apparently missing the point that under Off-Payroll, contractors will cease to be able self-assess their employment status.

At a hustings jointly organised by freelance trade body the Association of Independent Professionals and the Self-Employed (IPSE), Enterprise Nation, the Institute of Charted Accountants in England and Wales (ICAEW), and the Entrepreneur’s Network on Monday night, Labour’s Bill Esterton stunned the audience when he told them: “we absolutely can’t see [Off-Payroll] rolled-out into the private sector the way things are at the moment.”

Asked later to confirm whether it was Labour Party policy to postpone and review the private sector roll-out of Off-Payroll, the MP for Sefton Central tweeted: “absolutely”.

At the event, Mr Esterton 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.”

Whilst making no firm commitments, Mr Esterton also implied that the existing public sector Off-Payroll rules, rolled-out in 2017, could be up for review as well: “in the public sector, [Off-Payroll] has been implemented right across the board, causing real problems for self-employed professionals who need to get contracts.  Causing real problems for the public sector as well.

“We are seeing a reduction in the availability of skilled workers in the health service and elsewhere as a result … there needs to be a fundamental review.”

However, planned increases to corporation tax announced in Labour’s manifesto last week will have an adverse effect on contractors who remain “outside IR35”.  Labour would reintroduce a small companies’ rate of corporation tax that would rise to 21 per cent by 2022; corporation tax is currently charged at a flat rate of 19 per cent.

When asked on LBC how the Conservatives could justify characterising themselves as the “party for business and innovation” whilst introducing the unpopular Off-Payroll policy, the Justice Minister pointed to the lowering of corporation tax by the Tories from 28 per cent down to 19 per cent, and the raising of the personal allowance to £12,500.

The stances of all three major parties on Off-Payroll have now been made clear, with the Liberal Democrats manifesto, published last Wednesday, pledging that the party would halt and review the IR35 reforms, and also end the unpopular quasi-retrospective Loan Charge tax.

Simon McVicker, director of policy at IPSE, said: “we are absolutely delighted that Labour has heeded our calls to halt the roll-out of the disastrous changes to IR35 next April.  As Bill Esterton pointed out at our debate, when the changes were introduced in the public sector, they caused serious skills shortages in the health service and beyond.

“The pledge to halt and review the changes will be very welcome to freelancers across the UK.  The review would give IPSE the chance to clearly show the damage these changes would do and stop them once and for all.

“Labour’s manifesto commitment to raise corporation and dividend tax caused concern among freelancers and is still a worry.  However, pledging to halt and review the changes to IR35 shows the party is serious about the self-employed.

“Now both Labour and the Liberal Democrats have heeded IPSE and the freelance community on IR35, it’s time for the Conservatives to take note too.  The five million-strong self-employed sector is vital to the economy and the country and its voice must be heard [at] this election.”

This month recruiter Harvey Nash published the results of a survey of 1,200 tech sector contractors that revealed that many may resist voting Conservative should the reforms to IR35 go ahead under a Tory government.  Harvey Nash managing director Matt Smith commented: “There are an estimated 4.6 million contractors in the UK.  That’s about 15 per cent of the workforce.  These individuals are critical to the evolution and success of our economy, from the NHS to the thriving tech sector.  With the potential impact of IR35 on their livelihoods, the survey shows it will be a major factor in their voting decision in December.”

28th November 2019.