The Chancellor has warned HMRC not to be “heavy handed” in relation to the forthcoming IR35 rule changes, as businesses and contractors adjust to the new legislation.
Speaking on Saturday, Rishi Sunak, who was promoted to the position of Chancellor of the Exchequer in February’s Cabinet reshuffle, said he wanted to reassure UK businesses that the policy would have a ‘soft landing’.
Mr Sunak said: “I’ve spent time with HMRC to ensure they’re not going to be at all heavy handed for the first year, to give people time to adjust.” He also reiterated that the ongoing review into the policy’s implementation will include “tweaks and improvements to make sure the transition is as seamless as possible.”
The [IR35 rule] changes stipulate that all medium and large businesses now have to determine the employment status of any individual they hire, who provides their services through an intermediary; usually a personal service company. It’s anticipated that the new rules will affect close to a quarter of a million freelance contractors. Not to mention tens of thousands of British businesses.
‘Softer approach’ but NO change in stance
The results of the highly anticipated review into IR35 implementation are expected to be published ahead of next month’s Budget announcement. And HMRC has set up a dedicated taskforce to support those affected by the rule changes. As well as resources such as workshops and online tools.
However, Mr Sunak’s mitigating language doesn’t appear to offer any sort of hint towards a change in stance ahead of April’s implementation.
The Chancellor went on to say: “[IR35 rule changes are] going to mean some changes because some people, unfortunately, were operating in a way which meant they weren’t paying the tax they probably should have been. Because, essentially, they were employees but they were being taxed as if they were self-employed.”
“It’s not fair to all the people who’re employed that someone else doing the same job is paying less tax. Ultimately, that tax pays for the NHS, social care and everything else. So, it’s right that that unfairness is corrected and it is going to mean a change for some people.”
“It’s not a sudden change; we’ve known about it for a while and we’ve been consulting on it. We’re shortly to publish a review of how it should be implemented. This will have some tweaks and improvements to make sure the transition is as seamless as possible.”
Industry unrest continues
Mr Sunak’s comments come in the same week as a landmark ruling against the TV presenter, Eamonn Holmes. The This Morning host faces a large tax bill after losing his IR35 tribunal case. Reportedly as much as £250,000. Mr Holmes claims that he’s a freelancer who gets paid via his limited company, ‘Red, White and Green Limited’.
In a statement published by Contractor Calculator, Mr Holmes’ spokesperson said: “Eamonn has always considered himself a self-employed freelancer and has never knowingly avoided paying tax. Like many people across the country, he is seeking to comprehend what this means. He simply wishes for clarity and consistency across the guidelines so people don’t suffer the same confusion over retrospective rulings.”
What’s more, earlier this month, hordes of angry contractors marched on The Treasury in protest at the proposed regulatory changes.
Despite the outcry from some quarters, these IR35 rule changes ARE going ahead. Now is the time for businesses and contractors alike to make sure they’re ready. To find out more about IR35 and how to prepare, check out our exclusive IR35 Hub.