Will the new Chancellor take a broom to IR35?

29th July, 2019

Will the new Chancellor take a broom to IR35?

Dust that becomes grime, can be difficult to move

We are an apolitical company. As such, whilst we have watched the unfolding of the Tory party’s leadership process with interest, we have no opinion as to the result.

We do however have a very positive view on the appointment of Sajid Javid as the Chancellor of the Exchequer and congratulate him on his appointment.

That post is one of huge scale and importance and we’re sure that there will be many entities beating a path to his door in the hope of an early request for more funds (nobody ever asks for less). It is likely that these will be granted before he has grasped the full consequences. That is not a bad thing and we have no hesitation in adding to his list of begging letters.

We saw the old guard in Treasury as reactionary. Mr Hammond was an old school loyalist and was always going to follow the advice of his senior Civil Service officials who are fiercely protective of HMRC. Despite the manifest errors that department has made in the past 5 years, finding any meaningful criticism of them in HMT was impossible. It is arguable even that HMT went out of its way to defend the agency, to the extent of elected members of Parliament making inaccurate and misleading statements to the press and their peers (literally).

A New Broom

They have gone and Mr Javid is a new broom.

We perhaps see the forerunner of the effect of this in the conciliatory statements of Mr Norman who wants to consult on a new layer of oversight for HMRC. We have published our views on that and in a sentence, without independence from HMRC or the ability to intervene in live enquiries, we see this proposal as a political gambit without substance. However, the fact that it was made at all signals a possible change in approach from the Hammond/Stride days.

High on the list of considerations for the new Chancellor are IR35 reform and the loan charge.

There are lots of reasons why the reforms in their present guise should be postponed and the idea returned to HMRC (and perhaps an independent body) for review and amendment. The current proposal is flawed and will inevitably lead to more tax avoidance. Further, a system in which a decision on tax status which is made not by HMRC but by a party with a vested interest in what is best for them – and not the UK – and which cannot be appealed, is an affront to the very bedrock of our tax code.

I do not have time or space here to develop this, but no doubt will later.

The loan charge is a more urgent problem.

Fairness, unfairness

We have published many thoughts on this and pointed out its inherent unfairness; its effect in hiding poor performance from HMRC; its blatant misuse of the fairness argument that HMRC is so fond of; its application at a personal level causing maximum anxiety; the callous and cynical communications strategy around compliance, increasing that stress.

Top of our list of requests to the new Chancellor is therefore to request that the charge be at least postponed until a proper review, producing independent and verifiable evidence to support the charge – not a Band-Aid for HMRC incompetence – is held.

New brooms are meant to sweep clean. Let’s hope so.

Let’s hope that the deeply ingrained instincts of an HMRC, who think that they are unaccountable and can act with impunity, can be scrubbed clean.

The UK is going to need every ounce of entrepreneurship (if that how you measure it) and drive and ambition and yes – positive thinking – in the next few years. Having that period start with a retrospective tax charge is not conducive to that plan.