Contracting End in Sight
Is the contracting end in sight now?
Chancellor Hammond’s Autumn Statement could signal the end of the contracting profession as we know it.
Freelancers who work through Personal Service Companies, in the public sector, will no longer be given the choice as to how they operate.
They will no longer decide if they are inside IR35 or oustide for tax purposes.
Recruitment Agencies Choose Contractor Status
That choice will go to whoever has found them the contract, in most cases the recruitment agency.
If the recruitment agency get t wrong, they will suffer the financial penalties rather than the contractor.
Anyone who thinks that agencies will go out on a limb for contractors so that they can save tax has obviously not dealt wih agencies before.
Recruitment companies will force public sector contractors to pay IR35 tax.
HMRC Estimate of Contractors Inside IR35
Indeed, HMRC estimate that 90% of all public sector contractors will now have to pay the IR35 tax.
That means that only one-in-ten public sector contractors will, in future, operate like proper freelancers.
HMRC reckon that there are 20,000 contractors in the public sector whom it will affect.
Damian Broughton of Danbro reckons that there are a lot more.
Online IR35 Test
HMRC are even going to bring in an online test which contractors will have to take to decide their status.
Not only that, when the contractor takes the test, the details will go to HMRC for future reference.
If the last online IR35 test that HMRC created in counjunction wih contractors’ group IPSE, is any guideline, then this online test will be a complete joke.
They will weight it in their favour as the last one was. It is sure to be.
How do they know, already, that 90% of contractors will be caught by it?
The previous points system was so difficult that almost all contractors would be inside IR35.
No Basis in Law
However, this had no basis in law.
The vast majority of contractors are outside IR35, yet they failed that test.
Don’t expect this one to be any different.
Even though this online IR35 test will have no basis in law, public sector clients and recruitment comapnesi who supply them will take it as gospel when they are deciding if they should force public sector contractors to pay IR35 tax or not.
Why should your agency take any chance when the online test says that you are inside IR35. That’s even if, legally, you are not?
Private Sector Contractors Future
If you are not a public sector contractor, you may be wondering what this has to do with you.
However, there is a very good chance that the public sector will just be the testing ground, like Scotland was for the Poll Tax.
If this works and brings in he extra tax they are predicting, it is going to be mighty tempting for the Tories to roll it out for private sector contractors too.
Does anyone want a bet that they won’t, sometime in the next few years?
Contractor Lobbying Groups Ineffective
Following Labour’s example, the Tories feel free to ride roughshod over freelancers in a way that they wouldn’t do for other groups who lobby far more effectively.
Whatever lobbying that contractors groups do, it doesn’t appear to have much effect in stopping the Tories in their tracks.
They have no fear of them and the consequences of anti-Contractor legislation.
If they really do believe that the majority of contractors are disguised employees then why don’t they allow them all the rights of real employees.
Why are they only disguised employees for taxation purposes?
Less Worthwhile Being a Contractor
Once 90% of all contractors are paying IR35 tax it will be less worthwhile being a contractor. So fewer will become contractors.
This will mean that the UK will go from having the most flexible workforce to having one of the least flexible workforces.
If they do roll it out to all contractors, and catch 90% of them for IR35, there will be a lot fewer contractors.
However, we believe this is coming!
The contracting end may now be in sight.