Chancellor will create a crisis for the self-employed if he rolls out 'disastrous' IR35 tax regulation - IPSE
Chris Bryce, CEO of IPSE, urges MPs to stop a ‘disastrous’ policy decision that will ‘unfairly punish’ one of the most productive sectors of our workforce.
Right now, the self-employed, one of the fastest growing and most productive sectors of the UK workforce, are facing a crisis. It is not an inevitable crisis – the result of unstoppable market forces or technological change: it is caused by Government policy.
In the run-up to the Autumn Budget, reports are circulating across the media that the Chancellor is planning to punish the self-employed with an extension of the disastrous changes to IR35 tax regulations from the public sector to the private sector. First introduced to stamp out ‘disguised employment’, in practice IR35 regulations have caused many self-employed people to be unfairly taxed like employees – without any of the benefits.
The changes to IR35 – rolled out in the public sector in April – essentially shift responsibility for determining IR35 status from the self-employed themselves to their clients. And because determining status is notoriously difficult, many public sector bodies have simply put all their contractors under IR35, doing serious damage to thousands of self-employed people and causing them to leave the public sector in droves. Extending these changes to the private sector would constitute a genuine crisis for the UK’s self-employed.
At IPSE, we are dismayed that the Government would even consider such a move. The self-employed already justifiably feel they are under sustained attack from the Government. As well as the changes to IR35 in the public sector, they have endured the introduction of dividends taxes and an attempted NICs hike. And as recently as a week ago, the Government announced it would delay the promised scrapping of Class 2 NICs, a move that will cost every self-employed person £150.
Now, whenever we survey our members, they consistently say their confidence is dropping and that Government policy is one of the biggest threats to their business success. If the Government extends the changes to IR35 to the private sector now, it would be yet another blow to the self-employed and clear confirmation that it is determined to attack one of the UK economy’s greatest assets.
Not only would such a move unfairly punish one of the most dynamic and productive sectors of our workforce, who contributed £255bn to the economy last year alone; by harming them it would also impair the flexibility of our labour market. This seems unwise to say the least when our flexible labour market is one of our greatest competitive advantages: surely, as we prepare for Brexit, we should be promoting this asset not stifling it.
Perhaps worst of all, extending the IR35 changes to the private sector would almost certainly not achieve the Government’s professed aim: tackling disguised self-employment. If the Government was serious about tackling this problem, it would introduce a statutory definition of self-employment to clear the confusion about employment status once and for all.
IPSE warned about the damage the changes to IR35 would do in the public sector. Six months on, we have been proved right. Already, for example, there has been a mass flight of freelancers from the NHS, and numerous TfL projects have stalled because contractors are leaving en masse in response to heavy-handed, blanket inside-IR35 judgements. These changes should now be scrapped and sense restored.
We hope that after the dire effects of the changes on the public sector, this time the Government will heed our warnings about the private sector. The UK’s flexible labour market will be more important than ever to our economic success after 2019, and we cannot afford to have it stymied and suffocated with further punishing IR35 changes.
That is why we have called on the Chancellor to support this vital part of the economy, not undermine it. Many MPs will already have been contacted by their constituents: please heed their warnings and make sure the Chancellor is aware of the grievous risks of this policy. Contact him now to back IPSE and help support the UK’s 4.85 million self-employed strivers.
Chris Bryce is the CEO of IPSE, the Association of Independent Professionals and the Self-Employed
Ahead of the Budget, Conservative MP Bob Blackman urges the Chancellor to take note of the Taylor Review recommendations on how best to support the self-employed. Read his full comments here