Javid’s exit raises new calls for IR35 review and delay while other tax measures are questioned.
New Chancellor, new hope?
Shock and renewed calls to put a halt to IR35 changes have followed Said Javid’s resignation as Chancellor of the Exchequer and the consequent appointment of Rishi Sunak.
“While cabinet reshuffles always have the potential to surprise, I think it’s fair to say that the majority of our members will be shocked by Javid’s unexpected departure – particularly as we are just four weeks away from the next Budget,” said Tania Bowers, Legal Counsel at APSCo. “As he assumes his new position as Chancellor, we hope that Rishi Sunak will honour his predecessor’s pledge to take another look at incoming changes around off-payroll working. While a review into the reform is currently underway, there has been no suggestion that planned reforms will be postponed. However, APSCo maintains that implementation should, at least, be delayed pending a further impact review and completion of an assessment on employment status.”
Seb Maley, Qdos CEO, commented: “With IR35 reform rapidly approaching, it’s vital that Rishi Sunak succeeds where Sajid Javid failed. We urge the new Chancellor to act immediately and halt the introduction of needless and short-sighted changes to the off-payroll working rules.
“However,” he added, “contractors and private sector firms cannot hang their hopes on a last-minute rethink, even if scrapping IR35 reform is the sensible thing to do. Businesses must work off the basis that changes will be enforced and should continue their preparations.”
Meanwhile, Nimesh Shah a partner at leading accounting and tax advisory firm Blick Rothenberg described Javid’s exit as ‘unbelievable’ given the closeness of the next budget.
“We would expect a lot of the Budget material will already be in place, more so because a Budget was already planned before the election which had to be postponed,” he said. “However, any major changes and decisions that were to be announced would presumably need to be put on hold and assessed by the new Chancellor.
“There has been a lot of speculation around entrepreneurs’ relief being changed or restricted in the forthcoming Budget – it’s possible that any such changes which were driven by Sajid Javid could now be shelved, and delayed in their introduction until a future Budget.
“More recently, there has been suggestion higher/additional rate relief for pension contributions could be scrapped and a wealth tax on property introduced – surely such significant proposals would almost certainly need to be reconsidered by the new Chancellor.”
Nimesh concludes: “The Conservatives have promised not to raise income tax whilst, at the same time, have made some significant spending commitments. To bridge this gap, I think Gordon Brown’s 1997 strategy will be dusted off and replicated. That is, income tax rates will remain unchanged but revenue will be raised by adjusting threshold’s for existing tax reliefs and other such measures.”
He added: “ It is also possible that Boris Johnson could push to introduce his leadership pledge of increasing the basic rate tax band to £80,000 – this was expected to cost the Treasury around £8 billion, and it still remains difficult to see how such a tax cut could be justified given the significant spending plans. However, nothing should be ruled out now as Boris Johnson could finally get his way with this measure.”