In the recently announced Budget 2018, the Government has decided to defer the private sector IR35 reform until 2020. This news has been welcomed by agencies representing self-employed and contracting professionals. However, they also criticised the Government for proceeding with the controversial tax reform.
According to the Sam Hurley of the Association of Professional Staffing Companies (APSCo), the decision to extend IR35 reform will have a negative effect on not just the labour market but the economy as well.
Mr. Hurley had stated that the trade body is concerned about the Government’s inaction to make any changes to the IR35 reform, especially regarding the inaccurate Check Employment Status for Tax (CEST) tool.
Similar criticisms were aired by experts at Association of the Independent Professionals and the Self Employed (IPSE).
Chris Bryce, the CEO of IPSE, had referred to the rollout of the private sector IR35 reform as a ‘smash and grab’ approach towards private sector enterprises in the country. Mr. Bryce had stated that the Chancellor had created an extended pattern of despair for contracting professionals as they will have to wait longer for the implementation of the dreaded IR35 private sector extension.
Negative Impact on Entrepreneurialism
Experts predict that IR35 reforms could lead to a shortage of skilled labour that will prevent businesses to access cheap labour. This would likely discourage entrepreneurs from setting up new businesses in the UK.
The support of private sector firms is required more than ever today to navigate the economy after Brexit. According to Mr. Bryce, taxing private businesses will damage the UK economy as it will force most of flexible businesses out of existence.
IR35 reforms are anti-business that will negatively affect competition among UK firms. Large corporations will have a clear tax advantage. They can force thousands of independent contracting professionals out of business. It will allow large companies to pick all the contracts, which will hurt the UK consumers as they will have no other options but to pay higher prices charged by larger companies.
Independent contractors and self-employed individuals contribute about £271 billion to the economy each year, according to Mr. Bryce. The Government must support rather than go against this valuable segment of the economy. They provide greater flexibility to enterprises resulting in reduced operational costs. He has vowed that IPSE will continue to wage a fight against IR35 in the years ahead.