Contractors are Tax Evaders
The Conservatives appear to believe all contractors are tax evaders. According to Treasury Minister, Jesse Norman, only 10% of contractors are compliant with IR35. He said this in an answer in parliament to Scottish Nationalist MP Martyn Day.
This has completely shocked the contracting community in the UK. They already knew that the Government plan to hit contractors hard in April 2020. However, they did not know that this appears to be just the first step in obliterating limited company contracting altogether.
Check Employment Status for Tax
HMRC’s online IR35 online tool, Check Employment Status for Tax, (CEST) shows around 54% of contractors as being outside IR35. It shows 31% as being inside IR35 with 15% not determinable. So, that means that only 3-in-10 contractors are inside IR35. So, how does Jesse Norman believe that only 10% of contractors are compliant with IR35 tax?
Indeed he appears to believe that the ‘fact’ that 90% of contractors are non-compliant with IR35 is common knowledge.
Government Believe All Contractors are Tax Evaders
Here is the Parliamentary exchange:-
Martyn Day (SNP)
It is only correct that contractors pay their fair share of tax, but the IR35 rule fails to equalise tax equally between them and employees, and is overly bureaucratic. Will the Minister join me in urging the Chancellor to ensure that the 2019 Budget and Finance Bill improve the rule or scraps it altogether?
I am sure the Hon. Gentleman will be aware that there is only about a 10% compliance rate with proper tax payable in this sector. He should therefore be applauding, as I am, the means to raise the level of compliance. In many ways, this is a simplification of the rules, which is being carefully and deliberately handled.
Contractors not Paying Enough Tax
This is unbelievable. However, it does fit in with what Prime Minister Theresa May and Chancellor Philip Hammond both said last year. They said “It is an anomaly that a self employee person earning £100,000 a year pays less tax than an employee who earns £100,000 a year’.
They are obviously going to fix that ‘anomaly’. Indeed it sounds as if they believe that all contractors who pay less tax than employees are tax evaders. And it seems to show that they intend to ‘fix’ this. If they don’t get them this time their guns are still aimed it those who stay outside the new IR35 rules to be published on July 11th this time.
It may even be a pointer to the bill being even more draconian to contractors than we expect.
Contractors Non-Compliant in This Area (IR35)
Let me ask you this question. If the Government do believe that only 10% of contractors are ‘compliant in this area’, will they just tax the 31% of contractors caught by the CEST online test as employees and leave the 54% of contractors not caught by the test?
If they believe 90% of contractors to be non-compliant will they allow 54% of contractors to continue to use limited companies? Or will they keep going till all of those 90% of contractors are ‘compliant in this area’ and pay the same tax as employees – fixing the ‘anomaly’.
Who are the Compliant Contractors?
Also, who are the 10% of contractors who the Government do believe to be ‘complaint in this area’? I assumed, at first, that they believe 10% of contractors to be genuine businesses who should still be able to claim business expense.
But then I thought again. Is this 10%, perhaps:-
- those contractors they have caught for IR35 previously
- contractors who just decided to pay the IR35 tax
- contractors in the public sector who were forced out of limited companies
I think this is more likely than the former.
Umbrella Company Contractors are Tax Evaders
I did wonder if those complaint included umbrella company contractors. However, I looked that up and saw that 14% of all contractors are umbrella company contractors.
We already know, when they cut the expenses that umbrella company contractors could claim, that they believe they are tax evaders too.
I reckon they believe that 100% of contractors are tax evaders. The 10% compliant I believe to be those, mainly in the public sector that they have forced to ‘be compliant’.
Conservatives Believe All Contractors are Tax Evaders
So, it looks as if the Conservatives, the party of business, intend to stop all contractors from using limited companies. And that will definitely be the end of contracting as we know it. Contractors will be decimated forever in the UK.
Contractors must go on this March on Parliament on July 9th. It is their last hope, their last chance, of keeping their profession and their lifestyles.
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