IR35 Finance Bill Effect
According to the Government 60,000 companies will be affected by the IR35 Finance Bill. However, Treasury Minister, Jesse Norman, said it is “not expected to have any significant macro-economic impacts.”
This is from the people who say that the IR35 changes in the public sector are working well and not causing any problems.
Questions Contractors May Have on IR35 Finance Bill
- How do companies currently use contractors?
- Will companies change the way they use contractors after the IR35 Finance Bill?
- Have any companies decided not to take on any more contractors?
- Will companies use fewer contractors after the IR35 Finance Bill?
- Should contractors pay the same amount of tax as employees?
How Do Companies Currently Use Contractors?
The use of contractors as a flexible workforce has evolved over time. Companies are currently using a mix of employees and contractors in the most optimal way they can for the success of their business.
If they change the way they use contractors at all then they will no longer be using contractors optimally. This is sure to have an impact on their business and their profits. This will have a knock on effect on the tax they pay.
If 60,000 UK companies are now going to change the way they use contractors that will have a significant impact on their business.
Will Companies Change the way They Use Contractors After the IR35 Finance Bill
After all, in a poll by Brookson Legal, 59% of companies said they were considering a standard approach to contractors. That standard approach is likely to be that they no longer take on limited company contractors.
Also, 85% of the companies surveyed said that the IR35 changes would impact the number of IT contractors that they will take on. You would not expect any of those companies to mean that they will take on more IT contractors after the IR35 Finance Bill comes into effect.
Have Any Companies decided not to take on any more contractors?
Indeed HSBC, Morgan Stanley and M&S Investments have already said that they will take on no more contractors from this autumn and all of their current contractors must either leave, become staff members or operate through a 3rd party vehicle like an umbrella company.
If they are currently working at the optimal level in the mixture of permanent and contract workers that they have then the IR35 Finance Bill changes they are making will have a financial impact on them.
This is the Government interfering in the market place. They know how much they can gain by taxing 170,000 limited company contractors. However, they cannot calculate how much profit 60,000 companies will lose by changing the way they use contractors with the knock on effect on profits and tax paid.
Will Companies Use Fewer Contractors After the IR35 Finance Bill
If 85% of those 60,000 companies use fewer (or no) IT Contractors after the IR35 Finance Bill this is sure to have a detrimental effect on the companies. After all, they must be happy enough with their current mix of permanent staff and contractors. That’s what works best for them.
This is a very good example of Government interfering in the marketplace when they don’t understand what they are doing. After all, anyone who says that it is ‘an anomaly that self employed people earning 100K a year pay less tax than an employee earning 100K a year’ is severely deluded.
Should Contractors pay the Same Amount of Tax as Employees?
The employee earns 100K a year plus perhaps
- 6 weeks holidays,
- a week or two off sick,
- paid time off to see the doctor or dentist,
- perhaps maternity leave of several months,
- national insurance contributions paid and
- pension contributions.
- Maybe there’s even share options too.
- They also don’t have the risk of being called into the office and terminated immediately without any redundancy money.
Anyone who doesn’t understand that must be seriously deluded – or a fool.
Step forward Theresa May, Philip Hammond, Jesse Norman, David Cameron and George Osborne.
What was it that Jeremy Corbyn called her? To avoid a sexism charge lets just say that it is one stupid woman and four stupid men.
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