IR35 consultation delay puts April 2019 start in doubt
A disclosure by the Treasury that the IR35 consultation will not be available until “the coming months” offers limited company freelancers some of the certainty that they say Spring Statement lacked.
Made last week to FreelanceUK, the disclosure is significant as it seems to rule out the consultation emerging imminently, making the initially anticipated April 2019 commencement for any changes optimistic.
PwC is among those who expected the Spring Statement to contain the IR35 consultation and, even if it had, the accounting giant says April 2020 would have been the more realistic start date anyway.
The fact that the consultation did not emerge may prompt Julian Sansum, PwC’s employment tax partner, to put back his envisaged commencement date for any new IR35 framework.
But for any IR35 changes to be made, notably last year’s reforms to IR35 in the public sector being extended to the private sector, others are eying an April 2020 start date too.
“It may be that they [the government] are waiting for the Employment Status consultation to close in June, or we may not see it [the IR35 consultation] until the Budget [this autumn].
“If the latter,” continued IR35 advisory Bauer & Cottrell’s co-founder Kate Cottrell, “then it is highly unlikely that any roll-out will happen until April 2020.”
And ‘later rather than sooner is no bad thing’ according to Graham Jenner, director of contractor accountancy firm Jenner & Co.
“With many [freelance] contractors in the public sector being unfairly treated as within IR35; simply because the public sector bodies don’t have the resources to properly review all the contracts, it would be wise for the government to ensure that the rules in the public sector are being properly and fairly applied, before looking to introduce anything similar within the private sector,” he said.
Public sector outfits have indeed taken ‘blanket’ decision that have seen genuinely self-employed consultants being pushed onto the payroll inappropriately, confirms the FCSA.
In explaining the predicament of such freelance professionals, Julia Kermode, FCSA’s chief executive, hinted at another reason why April 2019 looks too tight to bring any IR35 changes into force.
“These genuine contractors will have overpaid in tax so we will no doubt see a number of them seeking to reclaim their overpayments in due course, but we won’t know the real figures until after January 2019.
“HMRC representatives [at December’s IR35 Forum] did concede my point….and acknowledged that it was too early to judge the success of the policy thus far.”
‘Disappointing, although not surprising’
Yet even a small update on how making engagers rather than contractors decide IR35 status has fared would be better than no update at all, given that almost a year’s worth of evidence exists.
Ed Molyneux, boss of FreeAgent explained: “It’s disappointing, although not surprising, that the chancellor chose not to make any significant announcements in the Spring Statement.
“I think it was a wasted opportunity to provide some much-needed clarity about many of the big issues facing freelancers and micro-businesses -- and to properly explain what progress has been made so far in tackling them.”
But ‘progress’ may well be the stumbling block. Although the government is unlikely to regard itself as behind schedule (it has only said the IR35 consultation would be launched “in 2018”), some industry bosses expected it in the New Year.
‘Not yet materialised’
Comments from HMRC in recent weeks also suggested there was momentum behind it (at least internally at HMRC), but the tax authority is rumoured to be finding the April 2017 IR35 rules less than straightforward.
In addition, it is still yet to publish an external probe on their impact that was promised back in November 2017.
Ms Cottrell, formerly a tax official said: “The Revenue has as well promised -- at the IR35 Forum in December -- to give further guidance on how to reclaim the NIC in cases where the public sector IR35 decision is believed to be incorrect.”.
“And [HMRC is meant to publish all this] together with updated guidance on outsourced services/functions. Both of these have not yet materialised.”