Contractor IR35 Budget Tax Shock
A contractor reader just sent us this, about a Contractor IR35 Budget Tax Shock, after seeing our article Taxed as Employees – Contractors in Shock Over New IR35 Budget Proposal
I have just sent this to my MP Nigel Evans:
Contractor’s Letter to MP
Please refer to my earlier email that I sent to you in March, I did receive your reply and I am grateful for that.
In your reply you stated that you would be against any more moves that would impact the self-employed and I hope that you are true to your word.
It would appear that my worries were well founded.
If the leaks regarding the Chancellors intentions for the Autumn budget are correct regarding taxation of the self-employed there will be a fundamental, short-sighted move against self-employed workers which will have a detrimental impact on the economy and hit the ability of business to utilise a flexible workforce.
Damaging the Public Sector Contractors and Businesses
I find it astonishing that given the uncertainties that businesses face because of Brexit that the same sledgehammer approach that has been very damaging to the Public Sector since it was introduced in April will now be applied to the Private Sector.
What the Prime Minister and Chancellor fail to realise when they compare self-employed contractors and employees is that:
• As a contractor I have to facilitate risk in terms of job security and availability which is much higher than a permanent employee has to consider. My contracts are at the most 6 months in length but are subject to termination at 1 weeks’ notice. I would be both unwilling and unable to justify this risk if I were to be taxed like an employee without the same benefits.
• I have a number of expenses related to contracting. I pay for my own software and hardware, training, marketing etc.
• I do not get paid when I am not working as regular employee would do.
Benefits of Flexible Workforce
The whole purpose of why a business looks to a flexible workforce is self-explanatory but this government does not seem to realise the reasons or the benefits.
When a company is looking to implement new IT systems it can take many workers to be involved as part of the initial process.
Also the skills and experience for specialist roles may not exist in the existing workforce.
Employ Temporary Workers
The company would have 2 x choices; take on new permanent staff due to the increased workload, or employee temporary workers for the period that they need the resources for.
Once the project is completed many times the size of the existing workforce is sufficient.
Maybe they just need additional training.
If a flexible workforce is not available businesses both small and large would be forced to bring in large service provider companies, who usually charge significantly more (£1000+ per day) than a self-employed contractor.
Furthermore the self-employed contractor is generally highly specialised and experienced (we have to be to provide the services that are required) and the hiring company has much greater visibility in this regard as to who what they will actually be getting for their investment.
Proposed IR35 Changes Going Ahead
If the proposed changes go ahead I think it will be very damaging to business in this country.
The Chancellor should be looking to reverse the changes that he made to the Public sector, where many projects have been delayed or cancelled, recruitment has been hit etc. rather than ploughing on regardless in the Private Sector.
Contractor Job Satisfaction
I very much enjoy my job.
I love the flexibility that I have in terms of choice of roles etc, but at the same time I understand the risks that being self-employed brings.
The expenses that I incur, the fact that I do not get holiday or pension or medical benefits and the increased risks are only worth the consideration because the increased rewards offset and balance out those concerns.
If I were to suddenly be taxed as an employee, as looks to be the case, there would no longer be these counter balances to justify the flexible working and I would instead have to look to going back to a permanent role.
Less Competitive Economy
If everybody follows suit and the flexible workforce that we have today dries up it will make the UK a less competitive economy at a time when we should be looking to promote our competitiveness and benefits to business for why they should invest here.
I hope you understand my concerns and sincerely hope that you press the case of the flexible and self-employed worker in parliament.
I hope more people do the same!
If you want to avoid the Contractor IR35 Budget Tax Shock others should maybe do the same as this contractor.
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