New Chancellor Rishi Sunak has been urged to suspend the looming IR35 new tax regulations for self-employed workers or risk damaging the economy.
According to some industry bodies the change will lead to a third of self-employed contractors stopping freelancing over non-compliance fears.
Andy Chamberlain, deputy director of policy at the Association of Independent Professionals and the Self-Employed (IPSE), told the City AM newspaper that the new regulations would “have disastrous consequences for the wider economy”.
He said: “The changes to IR35 due in April are a clear and imminent danger not only to contractors, but also the businesses that engage them and the wider economy.”
The disquiet over the April changes has also seen protests by hundreds of freelance workers outside Parliament.
Also known as ‘off-payroll’ the rules allow HMRC to tax sole traders as employees if it deems their working arrangement are akin to regular staff.
Figures show that the rule change will affect some 230,000 contractors in the UK. And sectors heavily reliant on freelancers have raised growing concerns over its impact.
Tej Parikh, chief economist at the Institute of Directors, told the Financial Times newspaper: “Many firms remain unprepared for the legislation, given its complexity.”
The recruitment industry is also concerned. The Recruitment and Employment Federation has called for delay until 2021 and for the Chancellor to “pause and think again on IR35 changes”.
Chief executive Neil Carberry said: “The extension of IR35 into the private sector, as it currently stands, will punish ethical businesses, harm workers and provide the environment for non-compliance to thrive.”
As part of a review into changes to the operation of the off-payroll working rules, announced earlier this yar, the taxman has made an announcement to give business more time to prepare.
Earlier this month HMRC said changes to the operation of the off-payroll working rules will only apply to payments made for services provided on or after April 6 2020.
The announcement came ahead of the publication of the review. In a statement HMRC said: “A common issue raised over the course of the review has been businesses’ concerns over what payments the rules apply to and from when.
“The government has listened and taken action early to give businesses certainty and more time to prepare to ensure the smooth and successful implementation of the reforms that come into force in April.
“The rules, also known as IR35, will now apply only to payments made for services provided on or after April 6 2020.
“Previously, the rules would have applied to any payments made on or after 6 April 2020, regardless of when the services were carried out.
“It means organisations will only need to determine whether the rules apply for contracts they plan to continue beyond 6 April 2020, supporting businesses as they prepare.”
It added: “The off-payroll working rules have been in place since 2000. They are designed to make sure that an individual who works like an employee, but through their own limited company, pays broadly the same Income Tax and National Insurance contributions as those who are employed directly.”
The rules are intended to tighten non-compliance with off-payroll working regulations. They shift responsibility for determining the tax status of contractors from the workers to the end users – in this case, private sector medium and large organisations and charities.
HMRC says that the purpose of the review being carried out is “to address any concerns from businesses and affected individuals about how the rule changes will be implemented”.
It will also assess whether any additional support is needed to ensure that the self-employed, who are not in scope of the rules, are not impacted.
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