FT, Times report on IR35 ‘off payroll’ extension rumours

Reports in The Times and FT over the past few days suggest that the Treasury may be considering extending the ‘off-payroll’ IR35 rules to the private sector.

Since the implementation of the public sector off-payroll rules in April 2017, there has been a suspicion that the legislation may be extended to private sector contracts at some time in the future. Particularly if the first launch went well.

By all accounts, the public sector implementation has been disastrous, but this seems not to have dissuaded The Treasury from considering expanding the reach of the off-payroll net to include the far larger private sector.

Mainstream press reports

As is often the case prior to Budget announcements, potential pieces of new legislation are leaked to the press in advance. This year is no exception, with both the FT and The Times running IR35-related stories over the weekend.

The FT piece – Treasury considers crackdown on bogus self-employment – claims that the Government is considering extending its fight against ‘bogus self-employment’ to “stem the avoidance of billions of pounds of tax”.

Mel Stride, the financial secretary to the Treasury, in an interview with the FT, said that there was an issue of fairness at stake – not only over the way different types of employment are taxed but also between how contractors in the public and private sector are taxed.

Interestingly, Mr Stride claims that 90,000 more public sector workers are now being taxed as ’employees’ between April and June. No further details to back up this claim have been made public.

The Times also ran a story – Philip Hammond eyes £1bn budget raid on freelancers which also covers the Chancellor’s apparent desire to mount a “£1bn” tax raid on the nation’s professional limited company workers.

According to the paper, the move “is aimed at levelling the playing field between salaried staff and freelancers, who enjoy significant tax advantages if they work as independent contractors.”

Contractors targeted again

The phrase “significant tax advantages” is one the Government is particularly keen on using to describe how limited company directors are remunerated.

Unfortunately for contractors, very little is published about the significant costs they have to bear personally compared to traditional employees. Nor is any mention made of the huge dividend tax hike which took place in April 2016 – which costs the average professional contractor thousands more each year.

We will know if the Chancellor has decided to expand the off-payroll rules to the public sector when he delivers his Budget on November 22nd.

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