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Chancellor promises soft approach on IR35 changes

Rishi Sunak

Rishi Sunak: ‘tweaks and improvements’

New Chancellor Rishi Sunak has confirmed that HMRC will not be ‘heavy-handed’ during the first year of new IR35 tax rules affecting contractors in the private sector. 

The IR35 measures aim to prevent tax avoidance by “disguised employees”, contractors with regular positions at companies who do not pay the same tax or national insurance contribution as standard employees.

From April private sector employers will be responsible for assessing whether or not contractors need to pay income tax or NI contributions.

Mr Sunak has vowed “tweaks and improvements” to the new framework so the transition from the Intermediaries legislation of 2000 to 2020’s Off-Payroll rules is as “seamless as possible.”

The Chancellor said during a visit to Birmingham: “I’ve spent time with HMRC to ensure they are not going to be at all heavy-handed for the first year, to give people time to adjust as well, which I think is an appropriate and fair thing to do.”

Employer groups have been urging the chancellor to suspend the IR35 new tax regulations for self-employed workers or risk damaging the economy.

Industry bodies have predicted that the changes, which are due to come into effect in April, will lead to a third of self-employed contractors stopping freelancing over non-compliance fears. Some maintain that the softer approach is not enough of a concesssion.

However, one group welcomed the Chancellor’s more conciliatory tone. Brian Palmer, tax policy expert at Association of Accounting Technicians, said: “While many organisations continued to call for a delay to implementation, AAT recognised that further delays were unlikely, so instead called for a 12 month ‘soft landing’ period, with no penalties or fines imposed on businesses who can demonstrate taking reasonable steps to comply.

“AAT is naturally pleased that the Chancellor has agreed with our proposal and believes this should provide some much needed reassurance for both employers and contractors alike.”



5 Comments to Chancellor promises soft approach on IR35 changes

  1. So let’s be clear about this, the Chancellor has promised a soft landing but a lot of the bigger companies have enforced blanket bans and the Agencies are creaming even more money off the contractors by making them use certain umbrella companies.

    Meanwhile, the Tech companies are offering offshore expertise which they will reward by making them landed resources arguing that they have niche skills.

    Then the big consultancies will offer cheaper rates because they’ve mopped up cheaper employed resources from the freelance market.

    Who needs anti-competition laws when you can get the establishment to wipe out your competition?

  2. What a load of ***** , you get no benefit of PAYE, no sick pay, holiday pay, pension or bonus, but I get a 30% pay cut, still have to have insurance, provide my vehicle tax and service, and pay Vat. I am liable if things go wrong, not to mention time off between contracts, but you go online and pretty much every self employed person falls inside IR35, personally I’m looking to work abroad.

  3. How stupid are these so called educated people???
    The new 1R35 Tax rules will cause the biggest revolt by self employed ever seen, and it’s the big companies that have been making the most of the off payroll system, not the self employed workers. I was told by an agency to go Ltd company so as they didn’t have to pay my tax or any associated benefits like holiday pay or sick pay.

  4. Soft landing only sensible way forward.

    AAT bit of a lone voice on this one but shows it doesn’t always pay to follow the crowd!

  5. The aat position makes sense as there was never going be another delay and icaew and CIOT should have recognised this instead of banging on about the need for delay. Palmer is right to say employers and contractors will be reassured by this soft landing – but not all.

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