Chancellor Rishi Sunak has bowed to industry pressure over IR35 tax changes by promising enforcement will not be “heavy-handed”.
The IR35 measures were implemented in order to prevent tax avoidance by “disguised employees”, contractors with permanent positions at companies without paying the same tax or national insurance contribution as standard employees.
Under the latest reforms private sector employers will now be responsible for assessing whether or not contractors need to pay income tax or NI contributions.
Speaking at an event in Birmingham over the weekend, Sunak sought to reassure business that the reforms would not be heavy-handed.
The Chancellor is reported as stating: “I’ve spent time with HMRC to ensure they are not going to be at all heavy-handed for the first year, to give people time to adjust as well, which I think is an appropriate and fair thing to do.”
Responding, Brian Palmer, tax policy expert at AAT, said: “While many organisations continued to call for a delay to implementation, AAT recognised that further delays were unlikely, so instead called for a 12 month ‘soft landing’ period, with no penalties or fines imposed on businesses who can demonstrate taking reasonable steps to comply. AAT is naturally pleased that the Chancellor has agreed with our proposal and believes this should provide some much needed reassurance for both employers and contractors alike.”