Freelancers have called the government’s six-week review into IR35 tax changes “an insult” and claim HMRC is intent on bulldozing its controversial reforms come what may.
HMRC wants to bring thousands of freelance contractors who are effectively full-time employees within PAYE to tackle what the taxman sees is “disguised employment”. Responsibility for assessing the tax status of self-employed contractors is due to shift from the contractor to the company that hires them.
IR35 legislation, which has been heavily criticised by tax experts and business as being poorly conceived, badly implemented by HMRC and could reduce a worker’s net income by up to 25 per cent, is set to roll out on 6 April 2020.
>See also: Over half of self-employed don’t even know what IR35 is
However, the Federation of Small Businesses says that big corporations say they’ll pull the plug on contractors if IR35 goes ahead unchanged.
Today (Jan 7) the government launched its review into off-payroll working rules, gathering evidence from affected individuals and businesses, which it says will be completed by mid-February.
Julia Kermode, chief executive of The Freelancer & Contractor Services Association (FCSA), said: “This seems to be another meaningless review from a government who seems intent on bulldozing ahead with its plans anyway. They are expecting the review to be completed by mid-February which is simply not long enough to consider the deeply complex range of issues that the off-payroll legislation is throwing up.
“We have also learned today that the review will focus on the implementation of the reforms rather than the reforms themselves, which is not what was suggested and is not what is needed. I fear that today’s pledge is simply the government paying lip-service to empty election promises and nothing short of an insult.”
John Bell, founder and senior partner at licensed insolvency practitioners Clarke Bell, agreed that the government had not given itself enough time to conduct a thorough IR35 review.
Mike Cherry, national chairman of the FSB, repeated his call for IR35 changes to be delayed past April.
Cherry said: “At a time when skilled, flexible contractors are needed more than ever by employers, the switch in where responsibility lies for IR35 assessments will cause firms to shut out contractors.
“We have to remember that we’re in a global competition for talent. We need to make the UK a better, not more restrictive, place to do business.”
Dave Chaplin, CEO and founder of ContractorCalculator and director of the Stop The Off-Payroll Tax Campaign, was more conciliatory but still called for Chancellor Sajid Javid to kill the rollout of IR35 to the private sector.
Chaplin said: “Pushing ahead with this contract jobs killing measure will be insane as we leave the EU. Reliance on a flourishing flexible workforce will be vital.”
Meanwhile, the government has announced a separate review to see how it can better support the self-employed, including better access to finance and credit, making the tax system easier to navigate, and examining how better broadband can boost homeworking.
Further reading on IR35
6 top tips to prepare for IR35 tax changes – Small Business checklist