The Chancellor of the Exchequer, Sajid Javid, has announcing plans to hold his first Budget on 11th March 2020 – one month before the IR35 reform implementation on 6th April. A review of the extension is going ahead too, concluding in mid-February, but could the March Budget announcement include IR35 being delayed?
Richard Mort, a director at Edge Testing Solutions, comments: “We have already seen client companies view IR35 as a key risk for their business both from a financial and resourcing perspective. A nervousness is noticeable when reviewing IR35 requirements. Clients are also concerned that contractors or umbrella companies may increase their rates to compensate for loss of revenue.
IR35 is a massive shake up for the private sector, but despite the many papers analysing the impact of IR35, some of our clients are still unsure of the true level of risk they face. The Government review would have been welcomed by many, to ensure that the niche technical skills that the contractor market has for years provided continues to be a readily available source of expertise for the IT sector.
There’s going to be the biggest game of musical chairs in the contracting industry as every contractor tries to grab a seat with ‘outside IR35’ written on it. From April, their options will be limited. We could well see a more dramatic fall in the number of IT contractors this quarter and year. In those cases where the IR35 status of contractors is borderline, private sector organisations likely will err on the side of caution and refuse to engage those contractors off-payroll. Despite some of the claims being made, however, it seems unlikely that the rules will be the death knell of contracting.
Much will depend on whether HMRC takes tough enforcement action and publicly hauls an organisation over the coals. If that happens, it likely will have a chilling effect on the use of contractors. If enforcement action is not forthcoming, the impact of the reforms could be more limited. The IR35 challenge need not mean the end of a flexible external test workforce though. There are solutions available to fit each organisation’s ongoing tactical and strategic resourcing needs. IR35 may, in many ways, streamline and add greater efficiency to future resourcing models.”