No changes to IR35 legislation in Chancellor’s statement

Nick Elvin

There was no mention of changes to IR35 intermediaries legislation in the Chancellor’s Autumn Statement and Spending Review, despite fears within the recruitment industry and umbrella organisations of far-reaching reforms.

Recent reports leaked to the media suggested George Osborne’s statement would include significant changes to the IR35 legislation, which aims to tackle “disguised employment”. However, the Government did announce its intention to tackle “disguised remuneration schemes”.

In the Blue Book, published to accompany the statement, the Government also confirmed its plans – previously outlined in the Summer Budget 2015 – to restrict tax relief for travel and subsistence expenses for workers engaged through an employment intermediary, such as an umbrella company or a personal service company.

The Association of Professional Staffing Companies (APSCo) welcomed the lack of action on IR35. The organisation believes the Government has chosen to “think more carefully about the unintended consequences of the proposals”.

Samantha Hurley, head of external relations and compliance at APSCo said: “We understand now from HMRC that the Government is still considering responses to their discussion document. APSCo strongly protested against the proposals, leaked a couple of weeks ago, and it seems that the Government has listened to our concerns about damaging the professional, flexible labour market in the UK with a knee-jerk reaction.

“Of course, the lack of an announcement in the Autumn Statement doesn’t mean that the Government won’t go forward with this proposal in the future, but it does almost certainly mean that it won’t come into effect in April, 2016, which is what we feared.”

The Government confirmed that, following consultation, the restrictions on travel and subsistence relief will take effect from 6 April 2016. Hurley added: “Unfortunately, it appears that we will have to wait until the 9th December for the draft legislation to be published, before we will know the full details of the test that will be used to decide on someone’s employment status for tax purposes, and therefore whether they are able to claim tax relief on their expenses.”

Although there was no mention of changes to IR35, the Blue Book does outline the Government’s intention to “take action against those who have used or continue to use disguised remuneration schemes and who have not yet paid their fair share of tax”, and will also “consider legislating in a future Finance Bill to close down any further new schemes intended to avoid tax on earned income, where necessary, with effect from 25 November 2015″.

Julia Kermode, CEO of the Freelancer & Contractor Services Association, said: “As usual the devil was in the detail of the Chancellor’s Spending Review and it would appear that the Government will go ahead with its plans to abolish T&S tax relief from April 2016 for temporary workers engaged through an intermediary. It seems that those outside of IR35 will not be penalised, although we note that further change on the employment intermediaries legislation is coming following Mr Osborne’s statement that he will look into ‘disguised remuneration’ – and we will continue to play an active role influencing such policy discussions.”