The Conservative Government has repeatedly put the message across that it wants to be seen as a champion of small businesses in the UK. And this is important for the prosperity of the country as small businesses contribute billions of dollar to the economy.
By the year 2020, it is expected that the sector will contribute around £217 billion to the Exchequer. Considering the fact that the sector employs more than 16 million individuals — 60 percent of all private sector employment, the government needs to support this sector.
Government’s Abhorrent Lack of Support to Small Businesses
At the moment the Government is doing anything but gaining the trust of the small business sector. The proposed IR35 legislation will likely result in private sector contractors and self-employed individuals paying increased taxes. This will likely result in great financial hardship on the contractors.
What’s worse, Chancellor Philip Hammond had attempted to increase the NI contributions paid by self-employed individuals. But the Government had backed down after pressure from businesses groups and many Conservative MPs.
The Government has reduced dividend tax allowance and also announced its intention to scrap Class 2 NI payments that benefited the contractors.
Instead of supporting the millions of self-employed contractors, the Government is trying to squeeze the maximum amount of money from them. They are viewed as the fabled golden egg laying duck that was killed in the quest to obtain more golden eggs by the owner. If the Government continues to milk the self-employed individuals, it will have to suffer more losses as opposed to increased revenues.
The private sector contractors are the backbone of the UK economy. Trying to take them down through government legislations will create ruptures in the economic foundation of the country.
The Conservatives need to introduce reforms to support rather than discourage small businesses. While the Government has taken some positive measures in the past such as establishing a Small Business Commissioner to tackle late payment problems, and also the fact that the small business climate is better in the UK as compared to our European neighbours, the mood as of late seems to have changed.
The Government needs to ensure that the business environment remains stable in the context of the uncertainty due to Brexit. Extending the IR35 to the public sector will likely add to the chaos in the economy. The Conservatives should consider the rights of hardworking freelancers and self-employed individuals and scrap the off-payroll working rules for the good of the public.