IR35 self-employed tax reforms may damage the U.K’s economy
HM Revenue and Customs announced a slight delay to IR35 off-payroll working rule reforms.
What is IR35?
IR35 self-employed tax changes will come into effect on 6 April 2020. Off-payroll working rules for larger private sector companies will now only apply to payments made for services provided from 6 April 2020.
The Association of Independent Professionals and the Self-Employed are urging the Government to halt the changes to IR35 self-employed tax while a full and independent review is carried out.
IR35 Reforms:could be the first setback for this Government
If the reforms to IR35 go ahead in April as planned, they will lose this government the support of the UK’s 5 million self-employed. They will also do untold economic harm across the country. These reforms might be this first setback for this government.
UK’s major parties’ manifesto
The research comes that the UK’s major political parties had all promised to review IR35 tax reforms. It was part of their pledges in the lead-up to the general election in December last year.
Conservative party also pledged to review IR35 as chancellor Sajid Javid said the Tories would review the rules to “make sure that the proposed changes are right to take forward”.
This announcement came despite no formal pledge appearing in the party’s manifesto and now the spirit that promise has been broken and contractors across the country feel betrayed.
Self-employed people to lose their contracts
The promised review turned out to be little more than a hasty tick-box exercise. It will do nothing to assuage the fears of hundreds of thousands of self-employed people who face losing their contracts because of the changes in the self-employed tax.
IR35 reforms will essentially shift responsibility for judging whether contractors are “falsely self-employed” or not from contractors themselves to their clients. The problem is that the IR35 rules are nightmarish complex if clients get them wrong,
Companies afraid of falling foul
Many companies are afraid of falling foul of the complex changes. They are now scrapping their contractors altogether. Most of the larger and naturally more risk-averse banks have done this, and many smaller companies are following suit.
Others are only keeping contractors (willing to work “inside IR35”). Such contractors would pay the same higher rate of tax as employees without any of the benefits.
Findings of IPSE Confidence Index
Even before the changes take effect, they are already having a drastic impact on hundreds of thousands of contractors across the UK. And, come April, we can expect this to get worse. IPSE’s Confidence Index shows the changes to IR35 drove contractors’ confidence to the lowest level on record.
If the IR35 reforms proceed as planned, it will be a disaster not only for the self-employed themselves, but also for the wider economy. The self-employed contribute £305bn to the economy every year – enough to fund the NHS twice over.
In the long-run, instead of boosting government tax revenue, these changes will do severe damage to the economy.
IPSE is running the #StopIR35 campaign to push back urgently against these disastrous changes. They are urging the government to halt the changes to IR35.
They’re calling on contractors to write to their MPs alerting them to the damage these changes will do.
IPSE is also working hard to raise awareness about the changes. Moreover, how contractors and the self-employed could be affected.
Protest to pause changes to IR35
IT contractors and freelancers from across multiple industries gathered outside Parliament today to protest the government’s impending IR35 policy, which is set to forever change how they are taxed and quite possibly, employed.