Coronavirus stimulus is very welcome, but IR35 plans drastically undermine the contracting sector
The government's announcement to continue with its “disastrous” plans to extend the changes to IR35 to the private sector means it is “drastically undermining” the contracting sector, says Chris Bryce, CEO of IPSE.
Rishi Sunak’s “historic Coronavirus stimulus package” is very welcome. However, the announcement that the government will continue with its “disastrous” plans to extend the changes to IR35 to the private sector means it is “drastically undermining” the contracting sector.
This Budget is a mixed but overall still gloomy event for most of the self-employed. The measures to support the self-employed and small businesses through the Coronavirus outbreak are very welcome – and in-line with what IPSE has been calling for. However, just as the government tries to protect freelancers’ incomes with these measures, it destroys their work by forging ahead with the disastrous changes to IR35 despite heavy criticism.”
The historic stimulus package to support freelancers and small businesses through the Coronavirus outbreak is very welcome. It is absolutely right that the self-employed should get financial support if they become ill or have to self-isolate because unlike most employees, they do not have access to sick pay.
Removing the Minimum Income Floor for Universal Credit is a major step in the right direction. Freelancers’ problem with Universal Credit was always that the Minimum Income Floor ignored the fluctuating nature of their income. Removing this throughout the Coronavirus crisis should give them access to funds that will compensate for the fact that they do not have sick pay.
The new Business Interruption Loan Scheme will also go a long way to supporting self-employed people and contractors through the Coronavirus crisis, giving them temporary support to tide them over disruptions to their supply chains and other unforeseen problems. The £3,000 cash grant for small businesses could also be vital to many self-employed people who work through a limited company.
Despite positive measures to temporarily support the self-employed through the Coronavirus outbreak, what Mr Sunak did not say in his Budget speech was that the government has confirmed today that it will push ahead with the changes to IR35.
By forging ahead with these disastrous changes, the government risks hollowing out the UK contracting industry. Already, many companies across the UK have either declared all their contractors ‘inside IR35’ or scrapped their flexible workforce altogether.
Understandably, contractors are extremely concerned about this. Many we have spoken to are already seeing work dry up almost entirely, and our research shows at least one in three are planning to stop contracting in the UK. This will be catastrophic for the £305bn contracting sector and will do serious harm to the already troubled economy.
The government review of IR35 was recklessly inadequate. Conducted in less than two months, it was not even independently chaired, and its recommendations were ultimately little more than superficial tinkering.
The changes to IR35 will do serious damage to contractors, clients and the wider economy. We continue to urge the government to rethink this legislation and save the contracting sector while it still can.