Budget 2018: Kingsbridge Reaction

Budget 2018

Another year, another Budget. In recent times, contractors and the self-employed have become used to watching the Chancellor’s pronouncements from behind the sofa. It would be an understatement to say that the last few announcements weren’t particularly kind to the contracting community, so it was understandable if many approached this October’s Budget with trepidation.

Amid much rumour and speculation, there was uncertainty as to how the self-employed would fare this time around. Although many in the community were hoping that proposed private sector IR35 reform would be abandoned, in truth it was never likely to be an option.

Despite a plethora of evidence to the contrary, in recent months the government has gone to some lengths to praise the success of IR35 reform in the public sector. The real question was a simpler one: would similar reforms apply to the private sector from April 2019 or April 2020?

The Budget gave us our answer. Changes to IR35 will be rolled out in the private sector from April 2020, and will only apply to contractors engaged by large or medium sized businesses. As we saw from the rushed and somewhat myopic launch of public sector reform, implementing change of this kind needs significant consideration and careful planning. By giving a 17-month lead time, the government is allowing businesses time to adequately prepare and adjust to the future.

The government has clearly listened to the feedback they received from all stakeholders following the consultation period earlier this year and have accepted that reform on this scale requires proper thought and understanding. The 17-month window allows not only for adequate implementation but also for further consideration.

Many expect a further consultation to be published in the coming months, with draft legislation due at some point next summer. The march toward reform may be inexorable, but at least now there will be time and scope to shape the rules into something that works and something that is fair for contractors. This was not the case for the public sector, and would not have been the case had private sector reform been set to launch in April 2019.

The Details

From 6th April 2020, there will be a shift in the responsibility for determining employment status for limited company contractors. To quote directly from the Red Book:

“Responsibility for operating the off-payroll working rules will move from individuals to the organisation, agency or other third party engaging the worker.”

As a limited company contractor, you will no longer be responsible for determining your IR35 status if you are engaged by a large or medium sized company. Whilst the government is yet to define exactly what “large or medium sized” means in terms of numbers, it is likely to be applicable to the vast majority of hirers.

It should be noted that, despite some significant criticism from a number of quarters, the method by which IR35 status will be assessed is not changing (pending the outcome of any consultation at least.) If you are outside IR35 today, you will continue to be outside IR35 in 17 months’ time.

The real work ahead lies in working with end clients and engagers and making sure their IR35 assessment processes are sound and fit for purpose. It should be made clear to them, as it was at the beginning of public sector reform, that blanket bans on the use of PSCs should be avoided. With the date now set, it is vital the contracting community gets to work on preparing a smooth transition come April 2020.

Alongside the welcome delay in IR35 reform, announcements on an increase in the personal allowance, freezing of the VAT threshold, and the extension of the New Enterprise Allowance were all positives.

With uncertainty about exactly what post-Brexit Britain will look like, it is essential that the government does all it can to support the UK’s flexible workforce. With an opportunity now to guide their hand, we have every chance of making that happen.

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