IR35 – LET'S HOLD POLITICIANS TO ACCOUNT
Delaying changes to IR35 in the private sector is a key message in the REC’s manifesto ‘Making Great Work Happen’. In our discussions with politicians we have consistently campaigned for a delay to make sure legislation is improved and not rushed through. Whilst at this stage preparations by business for implementation must continue, a review of IR35 has now been promised by all the main parties in the course of the campaign. However, for this to be meaningful it needs to include delay.
Only the Liberal Democrats mentioned IR35 in their manifesto, promising to “review recent proposals to change the IR35 rules.” However, later we heard from Labour’s Shadow Secretary of State for Business, Rebecca Long-Bailey, on Radio 4 saying: “I think we need to have a system in place that is fair for the self-employed, and IR35 certainly doesn't work for them, so we will be working with the self-employed themselves and the organisations representing them”. She added that “we don't think IR35 is appropriate”.
Last week the Conservative Party joined the commitment to review. Chancellor Sajid Javid promised to “…review changes to IR35. Our plan to offer the best support to the self-employed”. He also 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.” However, when pressed he did not commit to a delay.
Throughout this year the government have said that IR35 changes would be rolled out to the private sector on 6 April 2020, at the start of the new tax year. Draft legislation was published in July. However, the legislation needs a Budget and Finance Bill to pass in Parliament before it can be enacted.
We agree with the political parties – review is necessary and we have been calling for this for some time. However, we need more time to allow for a proper review. Without this delay, any review would be meaningless. And importantly, both business and workers need to know the details of the review as soon as possible to avoid unnecessary costs. At the moment, businesses are still working on the assumption that IR35 is going ahead in April, and they are spending time and money in preparation to ensure they are not caught out.
Below are some of the top reasons we think the government should review IR35 for workers, recruiters and employers:
- Rushed, last minute legislation is hard to implement properly, and it is vital to get good legislation and compliance right from the outset.
- Delaying until 2021 would enable the government to assess the effect of the legislation including a full impact assessment of the IR35 public sector changes.
- Businesses’ awareness of the changes is low, and the government gave assurances in 2018 that companies would have time to implement the final legislation. It now looks like the legislation won’t be finalised until March 2020, which leaves only a few weeks for firms to get to grips with any final changes before implementation.
- Implementation in 2021 would also allow the recruitment industry to deal with the four legislative changes which will come into effect this April as a result of the Good Work Plan – Key Information Document, repeal of Swedish Derogation clauses, written statement and holiday pay changes. As well as Brexit.
- A delay would allow the government to regulate umbrella companies, something which it has long promised. Without this regulation we risk non-compliant umbrellas prospering, facilitated by IR35 changes. This would be bad for workers and runs counter to the government’s Good Work Plan.
Following this week’s election, a key priority for the REC will be to make sure the next Chancellor keeps their promise to properly review IR35. We will need your help to ensure we hold government to account on this crucial issue for the UK’s recruitment sector and flexible labour market – get in touch with your local MP after the election. In the meantime please visit the REC's IR35 hub.