The Association of Independent Professionals and the Self-Employed (IPSE) has published the views of a number of public sector contracting professionals, all of whom stand opposed to forthcoming changes to IR35 rules.
Describing the planned changes as enormously detrimental to the ways that these contractors can offer their services, IPSE pinpoints the issue that has drawn across-the-board criticism from industry experts: instead of the current arrangement, in which contractors are responsible for evaluating their own relationship with an end-client (and therefore whether they’re taxed as businesses or employees), the Government proposes to transfer this responsibility onto either the recruitment agency or the end-client.
Clients and intermediaries will thereby inevitably feel compelled to avoid risk and designate their contractors as working like employees, even in cases when it is glaringly obvious that they do not. Contractors will immediately be taxed as employees but will receive none of the statutory benefits linked to genuine employment.
IPSE cites the example of Matt Cocker, who runs a small marketing and management consulting company and says that he will lose out hugely if the changes come into effect. He remarked: “I have no confidence that the interim agency would have any skills, or willingness, to take my company tax position into account.
“They would err on the side of least risk and apply the tax regardless. The onus would then fall on me and my accountant to unwind and recover any overpayments, which could take a couple of years to recover.”
Another contractor, Nigel Simpson, who works for the MOD, said that the tax status of his microbusiness could not be fairly evaluated by a third party. Even with the professional assessment of his legal advisers, Simpson said that he could never be certain when accepting a contract what its tax status would subsequently be judged to be by an unqualified and unknown party.
Financial services contractor Chris Reilly said that the Government should help, not hinder, contractors like him who have assisted in shaping the country’s economy during uncertain times.
Speaking for many, a public sector contactor who wished to remain anonymous said that he and many others would be forced out of the public sector altogether “This is because it is very unlikely that I would be able to increase my day rate to compensate for the additional tax liability.”
The proposals have come under fire from Umbrella Company trade associations PRISM and the FCSA, as well as APSCo and the REC, besides many others.
IPSE is calling on contractors who will be affected to write to their MPs using a template letter identifying the damaging consequences of the reform. It is available here.