Promise to self-employed
Javid latest to pledge review of IR35 contractor tax rule
Sajid Javid: ‘on the side of the self-employed’
Chancellor of the Exchequer Sajid Javid has pledged a review of IR35 as part of the Conservative party’s manifesto bid to support self-employed workers.
IR35, which was introduced in 2000, is an anti-tax avoidance rule that applies to all contractors and freelancers who do not fall under HM Revenue & Customs’ definition of being self-employed.
It allows HMRC to collect additional payment where a contractor is an employee in all but name. If a contractor is operating through an intermediary, such as a limited company, and but for that intermediary they would be an employee of their client, IR35 kicks in.
From April 2020, every medium and large private sector business in the UK will become responsible for setting the tax status – or IR35 – of any contract worker they use, as a result of the changes which were introduced in last year’s budget.
Tax experts have predicted IR35 could reduce a worker’s net income by up to 25%, costing the typical limited company contractor thousands of pounds in additional income tax and NICs.
The Association of Independent Professionals and the Self-Employed last month called on the government to “pause” the incoming legislation as research revealed the extent of business anxiety around the shake up.
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.”
While there was no mention of such a commitment in the Conservative Party election manifesto, the Liberal Democrats, the SNP and the Green Party pledged to review IR35 in their election manifestos.
Labour SME Minister, Bill Esterson, suggested Labour would scrap an extension of the IR35 reforms and will undertake a review of the current plan but has not committed to scrapping the proposal.
Mr Javid said the Conservative party would also look at improving self-employed workers’ access to pensions and mortgages.