Following the election, a leading contractor tax advisory consultancy said that the resulting Conservative-DUP deal opens an opportunity for the new Government to make some bold reforms to the UK’s outdated tax system and rethink the impact that it has had on Britain’s two million freelancing and contracting professionals.
Qdos Contractor’s CEO, Seb Maley, pinpointed new reforms that the Government ought to consider for building a more equitable and simple tax system that would no longer unfairly penalise genuine freelancers.
He said: “First and foremost, attitudes towards the growing number of UK freelancers and contractors must radically change when it comes to tax. The vast majority of independent workers are not tax dodgers and do not choose to work this way to unfairly exploit the system. In times of uncertainty, the UK’s independent workforce has shown its value to the economy, contributing £119bn last year. Why target them, punish them and tarnish their hard-earned reputation?”
Mr Maley said that the time has come for tax to work for everyone. The Government, he added, should now work with freelancing and contracting professionals to construct a “fairer, smarter and simplified tax system.” This should take proper account of the rise of genuine freelancing in the UK and allow those who work in such a way to benefit from the new tax regime.
Addressing the prospect of recent, much-criticised IR35 reforms being rolled out to the private sector, he noted that the rebooted legislation had been rushed through in the public sector, leaving huge numbers of recruitment agencies, public sector end clients and contractors seriously confused by the situation. The predicament has not been helped by the unreliability of HMRC’s online ESS tool for determining IR35 status. Nor is it helped by the decision of several major public sector employers to make blanket IR35 determinations for all contractors.
The reforms were forensically and forcefully criticised during the consultation phase by a raft of professional bodies representing contractors and recruiters. Critics included respected organisations such as PRISM, the Freelancer and Contractor Services Association (FCSA), APSCo and the REC.
Highlighting the fact that over half (51 per cent) of the public sector contractors recently redesignated as inside IR35 plan to leave their roles, Mr Maley urged the Government not to extend the new IR35 regime to the private sector. Such a move could threaten freelancing and contracting entirely, placing considerable strain on the thousands of businesses that rely on these independent professionals.
Finally, he called for the Government to reverse its decision to cut the tax-free dividend from £5000 to £2000 and to commit to aligning tax and National Insurance Contributions.