Spring Statement: no news is good news on IR35

If you work for yourself, whether as a sole trader, via an umbrella, or through your own limited company or partnership, you will have come to dread the Chancellor’s bi-annual visits to the Despatch Box. Whether it’s Autumn or Spring, Statement or Budget, it amounted to one thing: trouble for the UK’s 4.8 million self-employed people. Today’s event bucked that trend, almost entirely. But we’ll come to the ‘almost’ shortly.

For once there was no big announcement unfairly linking the self-employed with tax avoidance. No threats of raising Class 4 National Insurance, no damaging reforms to the already disastrous IR35 rules, no additional tightening of the VAT flat rate scheme and no further change to the rate of dividend tax. Instead we got very little in the way of policy, and what we did get was actually helpful.

The Chancellor was at pains to point out the Government’s support of businesses and the self-employed and promised two key consultation documents that would appear to back up his claim. The first consultation is on late payment, a perennial problem for the smallest businesses in the supply chain, and the second on training. We are delighted that the Government has at long last heard IPSE’s pleas to equalise the tax treatment of training for employees and the self-employed.

For too long the tax system has only recognised training which is central to the activities of the self-employed business. It meant that self-employed graphic designers, for example, looking to undertaking training in bookkeeping to help their business administration, could not set that cost off against their tax bill. Hopefully the consultation will result in a change to that position.

For many IPSE members though, the really positive news from this statement, was no news at all. There was no mention of IR35, nor was there anything on the HMRC pages of the Government’s website either. November’s Red Book promised a consultation on IR35 compliance in the private sector and most commentators predicted it would come today. We were pleasantly surprised, therefore, when the mood music changed, and the rumour that began to circulate was that there would be no announcement. It seems that, for the time being at least, there will be no fraught discussions on whether the painful and costly public-sector reforms should be extended to the private sector. But it’s no great cause for celebration – that argument is still coming, just not yet.

Finally, there was one sting in the tail. The Chancellor didn’t quite announce it, but a call for evidence on lowering the VAT threshold was published shortly after he sat down. The document actually considers a range of issues related to VAT, but it doesn’t shy away from the fact that a lowering of the threshold may be one of those considerations. It’s important to note this is a call for evidence, not a consultation, which would be a much stronger indication of an impending change.

Nevertheless, it’s a worrying development. Previous Chancellors have pushed the VAT threshold up, removing our smallest businesses from the requirement of quarterly returns, and increasing overall costs for their customers and clients. For some reason this Chancellor is interested in lowering the threshold which will negatively impact those businesses with a turnover of under £85,000 (the current threshold) who are quite happy to stay out of the VAT regime altogether. IPSE will of course respond to the call for evidence accordingly.

Overall then, this has been one of the least harmful March statements for some time. The complete silence on IR35 is welcome, even if it just a temporary reprieve, and the positive steps on training and late payment are, well, positive. The VAT threshold is a concern, but the Government is at least in listening mode. Long may it continue.

Meet the author

Andy Chamberlain

Deputy Director of Policy and External Affairs