IR35 Shock as Chancellor Jeremy Hunt Says Contractors Must Pay Same Tax as Employees

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Contractor IR35 Poll Question
Contractor IR35 Poll Question

What does the new Chancellor Jeremy Hunt Think About IR35 and the Off Payroll Rules?

According to a tweet by a UK Contractors who is a constituent of the new Chancellor Jeremy Hunt, “Not based on the constituency surgery meeting I had with him on the subject. Chancellor Hunt said “It’s only fair that contractors pay the same amount of tax as employees…”

Groan!

Contractors were cock a hoop after Chancellor Kwasi Kwarteng decided that the 2017 and 2021 Off Payroll IR35 changes should be aborted. He said that the decision on who should decide a contractor’s IR35 status should pass back to the contractors.

The Off Payroll rules had said that this decision should pass from the contractors to the client company hiring them.

There would be financial penalties if those companies got it wrong.

What Did Major Companies Do About the Off Payroll IR35 Legislation?

So, many major companies decided that it wasn’t worth the risk and decided not to hire any more contractors.

Others tested contractors using HMRC’s dodgy CEST tool and found all their contractors as being inside IR35.

Companies are closer to their businesses than the Government or HMRC are.

They know how to balance the number of contractors they would use at any given time against the number of permanent employees that they need to use.

They know the optimal numbers of each at any given time.

However, if the Government and HMRC make companies too afraid to take on contractors then their companies are no longer using the optimal numbers of contractors and employees.

What Did Liz Truss and Kwasi Kwarten Do About Off Payroll IR35 Rules

Kwazi Kwareng and Liz Truss abolished the Off Payroll changes. They said that it would go back to contractors deciding their IR35 statuses.

Contractors were delighted. It came out of left field as well. They didn’t expect this.

However, with the Chancellor gone and the Prime Minister, Liz Truss, severely weakened, the odds are now that the off payroll rules will be left in place.

What Does Liz Truss Think About IR35?

So, what are Liz Truss’s views on IR35?

She said that she would commit to holding a review of IR35 if she became Prime Minister.

However, from experiences of the Cameron regime, contractors were not exactly dancing in the streets.

Saying you will review it is very far from saying you will abolish it.

After all, David Cameron told IPSE (or the PCG as it was then) that if he won the election he would ‘look at’ IR35 again.

Did David Cameron Keep His Word to Review IR35?

He was as good as his word.

He did look at IR35 and decided to keep it.

Not only that, he and Osborne strengthened IR35 and hired an extra 36 staff for HMRC just to enforce IR35.

Did Liz Truss and Kwazi Kwareng Keep Their Word About IR35?

Lix Truss and Kwasi Kwarteng were as good as their word.

It was in their mini budget that the Off payroll rules would be dropped and contractors would, once again, decide their own IR35 status.

Said Liz Truss when she was standing for the leadership of the Conservative Party “the reform of IR35 was

all about trying to treat the self-employed the same as big business, but the fact is, if you’re self-employed, you don’t get the same benefits as being in a big company. You don’t get paid holidays, you didn’t get those benefits. So the tax system should reflect that more.”

However, as we stated above, Jeremy Hunt told a contractor constituent of his “It’s only fair that contractors pay the same amount of tax as employees…”

This difference cannot be squared.

Liz Truss v Jeremy Hunt – Who Will Win over IR35?

Lix Truss said that the self employed should be treated the same as big business.

Jeremy Hunt has said that, for tax purposes anyway, contractors should be treated the same as permanent employees.

So, who will get their way over the IR35 off payroll rules?

According to today’s newspapers, Truss will have to go along with whatever Hunt proposes. She’s not strong enough to oppose him.

It would be good if the mini budget stood except for those measures that they will take out. That way the IR35 off payroll proposals might stand.

However, if they did a new mini budget from scratch, Chancellor Hunt is not likely to include that.

From reading today’s newspapers the latter is more likely to happen.

Is There Any Hope for Contractors as Regards the Off Payroll IR35 Rules?

There’s still hope for contractors but it is diminishing.

Indeed, Liz Truss might even be gone before the mini budget is due by the end of the month.

Contractors should pay the same tax as employees, says Chancellor Jeremy Hunt.

The self employed should be treated the same as big business, Truss says.

Who do you think will win this battle?

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Contractors Stunned as Chancellor Hunt Keeps Off Payroll IR35 Legislation in Place

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    2 COMMENTS

    1. It is typical Tory behaviour do as I say not as I do they all evade Tex by devious means by doing their own tax and dissallow contractors the same privallege Maps are pocket liners and cheat the public out of much revinue when I was working they did it to me we should remember this come election day

    2. I don’t mind paying the same tax etc as employees but I do expect to have the same rights ie sick pay, holiday pay, any staff perks and an employers contribution to my pension.

      Alternatively the clients have to accept that I, and I hope others, will be increasing my day rate.

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