IR35 Tax Change for Contractors
The Autumn Statement’s IR35 tax change means that 90% of all public sector contractors are likely to pay it.
That’s according to HMRC’s own estimate.
Damian Broughton, the Executive Chairman of Danbro said that the Chancellor’s contractor cash grab weakens the future of theUK economy.
The Chancellor decided to plough on with IR35 changes in the Autumn statement that will badly affect contractors in the public sector.
Recruitment Agencies Decide Contractors IR35 Status
Instead of contractors themselves deciding their own status the Chancellor has now put the onus on their recruitment agencies to make that call.
If the recruitment agency get it wrong they will be hit with the financial consequences.
So, guess which side the agencies are going to err on.
Tens of Thousands Hit
HMRC reckon that there are 20,000 freelancers in the public sector. Danbro reckon this figure is much higher.
HMRC reckon that around 90% of those contractors will now have to pay IR35 tax.
So, only one in ten public sector contractors will now be outside IR35. They will be very much in the minority.
All Contractors in IR35
Of course this could just be the practice for all contractors.
The private sector could be just the testing ground before the Tories train their guns on all UK contractors.
They would love it if 90% of all contractors had to pay IR35.
Tory Chancellors appear to beive that they can act with impunity when it comes to penalising contractors.
He is also going remove contractos 5% tax free allowance as they no longer had the administrative burden of deciding their own status.
Public Sector Freelancers
Broughton adds: “People who provide freelance skills to public sector bodies will now have to change the way they operate and, for many, work through an employment business as there are fewer incentives to have your own company.
“The likelihood is that these rules will also soon apply to the private sector.
“If penalising contractors and freelancers further wasn’t enough we also as yet have had no sight of the tool that the Government propose to use to assess these workers.
“It’s disappointing that we find ourselves again with no idea of what these changes actually mean. Also, how, as a sector, we should work with them.
Massive Skills Shortage
“This is sure to increase uncertainty. As a result of this is, many will leave the public sector, creating a massive skills crisis.
“We’re also puzzled that the five per cent tax-free allowance has been abolished. That’s becasue this is supposed to be for the ongoing costs of running a limited company. It’s not just for the initial admin burden of assessing your status.”
More Changes to Hit Contractors
As if this wasn’t bad enough, the Chancellor said that he would be looking at future changes, suggesting contractors face further regulation.
Broughton concludes: “Contractors should be concerned for the future. The Government is continuing to squeeze the lifeblood out of this sector.
“HMRC are tackling the abuses of the few by applying wholesale changes and this only serves to penalise the majority who operate fairly.
“This is a lazy approach and the Government must do more to understand this sector and the modern way of working so they can look at future policy and make sure Britain creates an environment that allows the temporary workforce to flourish.”
This IR35 Tax Change is not good news for contractors.