Companies IR35 Fears of Contractors Leaving
A new poll shows companies IR35 fears after the Conservative Government implement its next batch of IR35 reforms in April 2020. The Treasury believe that they will receive an extra £3bn over 4 years from this measure. However, this is a one-sided Cost / Benefit Analysis No one is counting the cost of implementing the IR35 changes in the private sector. And the UK’s big companies fear the cost could be massive. A one penny increase in the basic rate of tax would bring in £8bn extra in tax This just shows how small the amount of tax per year, ie three quarter s of a billion, r less than a tenth of a penny on tax, hat IR35 will bring in.
And to bring this in the Conservative Government and HMRC are prepared to gamble the whole British economy on it.
Contractors Questions on Companies IR35 Fears
- Who is responsible for the IR35 Reforms?
- What does the poll tell us about companies IR35 contractor fears?
- Will the Conservative Party’s IR35 Reforms Work?
- What Will be the Cost of Implementing he IR35 Reforms?
- Are Companies Worried About Keeping Their Contractors After the IR35 Reforms?
- What Are Companies IR35 Fears?
- Will Contractors Take Permanent Jobs After the IR35 Reforms?
- Will the Conservative Party’s IR35 Policies Wreck the UK Economy?
- Are the Conservatives Planning More IR35 Reforms After the Election?
Who is responsible for the IR35 Reforms
By the way, in previous articles I have criticized HMRC as many contractors do over IR35.
However, this is like blaming the monkey rather than the organ grinder. The people who are bringing in these IR35 changes are the Conservative Party. This is the supposed party of business. This is the party who profess to believe that the Government should stay out of the free market as much as possible.
HMRC report into the Treasury. The Treasury reports in to the Chancellor Sajid Javid.
The Chancellor reports in to the Prime Minister Boris Johnson.
It was Theresa May and Philip Hammond who changed he rules for the private sector. And although Sajid Javid called a few years ago for “Repeal of the silly IR35 tax” it looks as if he is going to implement these further measures.
HMRC are merely the implementors of Government policy. The reason these changes in IR35 are going in next April is because the Conservative Government wants them in. HMRC are just the vehicle they will use to do this.
What does the poll tell us about companies IR35 contractor fears
So, what does the poll, conducted by Robert Half of major companies say?
It says that 62% of companies are concerned about being able to hire freelancers after implementation of the Conservative Party’s IR35 plans. Many of them are ‘very concerned’.
That’s an astonishing amount. This could be a crippling blow to those companies and the UK economy. No wonderful they are so fearful.
Many companies say that their computer systems are their business. Nowhere is this more true than in the major UK banks. Yet they are all putting blanket bans on the future use of contractors using personal service companies.
Will the Conservative Party’s IR35 Reforms Work
The Conservative Government’s actions on IR35 will only work if all contractors meekly decide to close their personal service companies, pay PAYE probably through an umbrella company and just accept that they will receive perhaps 20% less than they currently get.
If even some of those contractors decide to leave the company rather than accept this, it will have an impact on the company. The contractors will take with them not only their skills but their knowledge of the company’s business and systems gained while they were working there.
That will be multiplied hundreds and hundreds of times across the country as all the UK’s major companies are hit.
What Will be the Cost of Implementing he IR35 Reforms
However, no one will be measuring the cost of that hit at all hose companies. No one will be putting that against the £750,000m that IR35 will bring in which is less than a tenth of a penny on tax.
This is economic madness. The cost to the economy will be many, many times that.
Companies are already working to what they believe is the optimum in terms of the mix of contractors and permanent employees. If Government action changes that then companies up and down the land are no longer working at their optimum. That will result in lower profits and lower tax paid to the Government.
Are Companies Worried About Keeping Their Contractors After the IR35 Reforms
Not only are 62% of companies worried about being able to get the contractors they want after the IR35 reforms but 42% of them are worried about being able to keep the contractors they have already got.
If the can’t keep them then a whole load of business and systems knowledge of the company will depart with those contractors.
What Are Companies IR35 Fears
There is a lot of fear out there among Britain’s biggest companies This fear comes from the Conservative government’s attempt to interfere in the smooth rubbing of the marketplace as regards the flexible workforce in order to extract a piffling amount of tax.
Theresa May said that “It is an unfair anomaly that a self employed person who earns £100,000 a year pays less tax than an employee who earns £100,000 a year”.
She, Boris Johnson and the Conservative Party, are all set to fix this ‘unfair anomaly’ by bringing in these IR35 reforms. These politicians understand neither the flexible workforce or the effects on the economy of what they are doing.
Our big companies do and that is why 62% of them are afraid they won’t be able to hire the freelancers they need. That is why 42% of them fear they will lose some or many of the contractors they already have.
Will Contractors Take Permanent Jobs After the IR35 Reforms
It seems that 38% of the companies said that they would avoid losing their contractors by transferring them to their permanent staff. I had to have a good chuckle at that one. That is very much wishful thinking. Good luck with doing that.
Most contractors are contractors because they like being contractors. The extra money is just an added bonus.
I can tell hose companies that even if some contractors go on their permanent staff rather than leaving and some join umbrella companies rather than leaving, they will be plotting their escape.
They will be making plans as how they can become again contractors who operate through personal service companies. And they will hate you for forcing hem to go down the PAYE route and they will hate every minute of being a PAYE employee or PAYE umbrella company employee.
Will the Conservative Party’s IR35 Policies Wreck the UK Economy
The Conservative Party are going full speed ahead to wreck the UK economy probably more than Brexit will do.
However, they have not finished. Even using HMRC’s Cheack Employment Status for tax toll (CEST), 54% of contractors are found to be outside IR35.
However, Treasury Minister Jesse Norman in answer to an IR35 question said that “There is only a 10% rate of compliance in this area.” A few weeks later HMRC said exactly the same thing (proving which one is the organ grinder and which the monkey).
Are the Conservatives Planning More IR35 Reforms After the Election
However, as more than half of contractors are found to be outside IR35 tool and the Conservative Government believe there is 90% non-compliance then the Conservatives must be planning something else after the election.
it is highly unlikely that they will be happy if supposed ‘IR35 non compliance’ stays at 10% or even rises to double what it is now – or to the 46% who either fail the IR35 test or are indeterminable.
They want 100% compliance ‘in this area’ so they must be planning something else for contractors after the election.
Which Party Are Worst for Contractors Over IR35
Labour, who implemented IR35 in the first place are bad for contractors on this issue
However, the Conservatives are even worse. They have strengthened IR35 and are unlikely to stop until they there is 100% of compliance with IR35. They need to have ten times as many contractors inside IR35 to meet that goal
Only the Lib Dems and SNP have positive policies on IR35. The Lib Dems say they will review IR35 again which will result in at least a delay. The SNP say it should be delayed until contractor concerns are addressed.
Contractors have set up a group to fight the IR35 changes.
See Contractors Set Up IR35 Resistance Group – Join Up
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