The government's and HMRC's botched handling of the rules relating to off-payroll workers (IR35) is likely to completely fuck up the freelance contracting industry.
The
FT reports that leading recruitment companies have demanded a delay and rethink to forthcoming UK tax changes that they warn will damage the industry’s growth and increase tax avoidance.
Companies including Adecco, Harvey Nash, Hays, Reed and ManpowerGroup wrote to Chancellor Sajid Javid on Monday urging him to think twice on changes to the rules for off-payroll workers, known as IR35.
Freelancers who bill for their services via a limited company currently assess whether they are employed or self-employed for tax purposes. But from April, all large and medium-sized UK companies will be required to assess the employment status of contractors they use, to tackle what HMRC calls “disguised employment”, where workers and companies avoid paying income tax and national insurance.
HMRC estimates that only one in 10 people in the private sector who should be paying tax under the current IR35 rules are doing so correctly. The reforms are projected to bring in £3bn over the next four years.
The changes will mean hiring companies, and anyone involved in the labour supply chain such as recruitment agencies, will be liable for unpaid tax if HMRC finds a worker has been wrongly classified. Hirers will need to prove they have taken “reasonable care” assessing their contractors, or risk being liable for any shortfall in tax and national insurance.
People, who are not freelancers, may well say "does this matter?".
It will mean that companies and organisations looking for contractors (eg IT specialists etc) will find that the supply dries up.
Ironically organisations such as HMRC rely heavily on such contractors!
Tax does have to be taxing.
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