PRISM is calling on the UK Government to introduce far-reaching tax reforms instead of simply extending controversial IR35 rules from the public to the private sector.
The not-for-profit trade organisation for umbrella companies is making the call in its representation for the Autumn Budget. Chancellor Philip Hammond has announced that the Autumn Budget for this year will be published on Wednesday 22nd November.
Introduced to the public sector in April this year, IR35 regulations were designed to detect and tax “disguised employment.” They have caused significant problems for freelancers, contractors and public sector employers. Many flexible workers, recruiters and organisations working with the self-employed have since expressed concerns that the IR35 legislation would also be extended to the private sector.
Crawford Temple, CEO of PRISM, said: “The IR35 legislation, as it stands, contains incentives and protections for both recruiters and workers to seek out providers who offer high-return but non-compliant solutions. Since its introduction, we have seen an increase in non-compliant offerings, with many able to fold when approached by HMRC.
“The regulation in its current form means it is highly unlikely that HMRC will be able to collect any taxes due from the non-compliant providers, and therefore, the anticipated tax gains will be significantly reduced.
“Extending these rules to the private sector will exacerbate the problem and will not deliver the expected HMRC returns. The long-term answer is a structural reform of the tax system rather than a sticking plaster approach of tweaking rules.”
PRISM has spent the last three years campaigning for a structural overhaul of a tax system that it describes as highly complex, expensive to enforce and with legislation that can inadvertently encourage or lead to non-compliance.
It has supported and enabled two reports reviewing the state of self-employment in the UK. These reports outlined tax reform proposals for contractors that could, PRISM claims, help tackle the fake self-employment issue that is prevalent within the “gig economy” and that IR35 was supposed to address in the public sector.
In May, the organisation highlighted a number of instances in which HMRC was providing contractors with incorrect advice regarding their tax status and IR35 compliance. According to PRISM, this demonstrated the complexity of existing regulations. Earlier this month, it also hosted a special event in parliament, during which Mr Temple called on politicians, unions and figures within the employment sector to come together to find solutions for the broken gig economy.