A sense of panic and alarm spread rapidly through the wider contracting community when HMRC sent IR35 letters to more than a thousand GlaxoSmithKline (GSK) freelancers and contractors last week. But this is just a ‘taste of things to come’ when IR35 changes are extended to the private sector in April 2020, according to a contractor interest group.
Brexit day is fast approaching and there is little certainty over how the negotiations will turn out.
Whatever happens, Brexit is likely to impact contractors in the UK. There may be some benefits in the short and long term, but many contractors are also likely to face some restrictions on their work.
In this blog post, we investigate the most likely Brexit outcomes and how they will affect contractors in the UK.
As the government consults on plans to extend IR35 rules to the private sector, self-employment organisation IPSE claims that the changes could ‘strangle’ contractor living standards.
IPSE claims that the ‘inhibiting, anti-business’ policy could cost contractors an average of £14,000 per year in lost income.
Calls from the Organisation for Economic Cooperation and Development (OECD) to revive plans for a self-employment tax hike have been met with scorn and confusion from self-employment pressure groups.
The last budget, delivered before the general election in June, included plans to increase National Insurance Contributions (NICs) for self-employed workers.
But in an embarrassing U-turn the Chancellor was forced to drop the tax hike when MPs pointed out that it contravened a 2015 election promise not to increase VAT, NICs or income tax.
Following last week’s Autumn Statement the government’s position on public sector IR35 reform is clear. But Britain’s judges could block the plans if they are shown to contradict employment law.
Set to be introduced in April 2017, the public sector IR35 reforms will lead to many public sector contractors losing some of their take home pay and the changes could have some nasty unintended consequences for public services too.
Boris Johnson has won the tentative support of contractor and freelancer organisations, but experts have urged the new PM to improve the economy and support the self-employed.
The Association of Independent Professionals and the Self-Employed (IPSE) called on the Brexit-supporting leader to keep the economy flexible and competitive in the run up to Britain’s exit from the EU.
In a statement, they called on Mr Johnson to reform the tax system and scrap damaging changes to IR35, reduce the retrospective nature of the loan charge and help stamp out late payments among other policies.
Freelancers are feeling the latest inflation rise more than employees, according to the Association for Independent Professionals and the Self-Employed (IPSE).
The warning for freelancers came after the Office for National Statistics revealed that inflation rose by a higher than expected 2.7% in August.
Measured by the Consumer Prices Index (CPI), this was the highest monthly price increase in six months.
Jordan Marshall, IPSE’s Policy Development Manager said: “Freelancers will be especially hard hit by this jump in inflation not only because, unlike employees, they pick up their own business costs, but also because they travel more to win and work on different contracts. They will particularly feel the effect of the 13.5 per cent jump in air fares, because many of them take up contracts overseas and travel long distances in the UK.
Last week, the Government’s Spring Statement warned that a consultation on extending IR35 off-payroll working reforms to the private sector could be due soon.
Off-payroll working didn’t make it into the Chancellor’s speech, but buried in a supplementary document the government did make mention of the rule changes.
The document says that “in the coming months,” the Government will publish “a consultation on how to tackle non-compliance in the private sector, drawing on experience of the public-sector reform.”
The latest Freelancer Confidence Index, measured by the Association for Independent Professionals and the Self-Employed (IPSE), has shown the poorest outlook on record in the second quarter of 2017.
Despite a continuation of high day rates for contractors, the survey showed that only 19% of freelancers were confident about how their business would perform over the next year. This was down a whopping 9% on Q1 2017.
Industry insiders have responded negatively to a consultation on the government’s latest IR35 proposal.
The proposal would see public sector organisations made responsible for determining the IR35 status of a contractor. Practically, this means that many more Personal Service Company contractors will be caught out by the IR35 legislation.
The contractors would be forced to pay tax as if they were traditional full-time employees, without enjoying any of the same employment rights and benefits.
Many inside and outside the industry see this as unfair. There is also a large amount of concern about some of the proposal’s unintended consequences.
The Freelancer & Contractor Services Association (FCSA) warned against leaving the decision to parties that will struggle to make an accurate IR35 assessment.