Suggestions emerged over the weekend from a senior Treasury official that the Government was considering extending IR35 rules to the private sector. In response, two leading organisations representing contracting professionals have called on the Chancellor of the Exchequer to refrain from doing so, or at least end damaging speculation, in his next Budget.
Mel Stride, Financial Secretary to the Treasury, told the Financial Times on Sunday that rolling out reformed public sector IR35 rules to the private sector was now an “issue of fairness.” Should this proceed, thousands of private sector contracting professionals could see major cuts to their income by being forced to pay employee income tax and NICs, despite receiving none of the statutory employment benefits that these taxes pay for.
In a letter to the Chancellor, the Association of Independent Professionals and the Self Employed (IPSE), emphasised that the country’s 4.85 million-strong self-employed workforce, which includes a major contingent of freelancing and contracting professionals, already believed they had been “under sustained attack” by the Government following controversial new IR35 rules in the public sector. Many had also been hit by the introduction of new dividend taxes. Forcing “disastrous” IR35 reforms on the private sector, IPSE warned, would confirm their worst suspicions.
IPSE itemised three reasons to drop the rumoured private sector IR35 rollout:
- It would unfairly penalise an exceptionally productive sector of the workforce which contributed £2.3bn to the British economy last year alone.
- It would damage one of the UK’s most coveted competitive advantages – the flexibility of its labour market – at a time when the Government should be supporting freelancers to ensure our economic success after exiting the EU.
- It would fail to tackle the issue of disguised employment. The government should instead introduce a statutory definition of self-employment, IPSE said, thereby protecting legitimate freelancers while truly clamping down on false employment.
Meanwhile, Qdos Contractor, a leading tax advisory service for contracting professionals, called on the Chancellor to at least be transparent in the Budget about any plans to extend IR35 to the private sector in order to end “damaging speculation.” Its CEO, Seb Maley, said:
“If private sector reform is, in Mel Stride’s own words ‘an issue of fairness’, then out of fairness our sector deserves to know the Treasury’s plans for the future of IR35 sooner rather than later. We all know what happened when public sector changes were introduced in April following years of uncertainty.
“While further reform is ill-advised, it can in fact be managed. But the Government must learn from its mistakes. The Chancellor has an opportunity to shed much needed light on plans for IR35, which we urge him to address in the upcoming Budget.”