New Government should delay IR35 changes

Whichever party wins the general election next month should delay changes to IR35, or ‘off-payroll working’, rules that are set to take effect in April 2020.

The call comes from the Federation of Small Business (FSB) and it highlights fears that the move could have significant impact on some businesses and sole traders.

The IR35 – also known as ‘off-payroll’ – rules allow HMRC to tax sole traders as employees if it deems their working arrangement are akin to regular staff.

In April 2017, responsibility for deciding whether IR35 should apply to self-employed workers shifted from contractor to employer in the public sector.

From April next year the same change is set to take effect in the private sector.

Some large companies affected by the extension of the off-payroll IR35 rules have started to curtail their use of contractors working through personal service companies (PSCs)

And a survey earlier this month revealed that as many as 20 per cent of UK businesses are axing contractors completely in order to ensure they are fully tax compliant ahead of the IR35 changes.

And it has been reported that almost two thirds of medium and large businesses are worried about missing out on skilled contractors and temporary professionals ahead of the IR35 expansion.

FSB, which represents small firms and the self-employed, has launched its own ‘Back to Business’ 2019 election manifesto – with the IR35 delay just one of its demands.

As many high streets across the country continue to struggle, FSB is asking the next government to fundamentally reform business rates, by enhancing and making permanent the Retail Discount – which entitles small shops in England to a third off their rates bills – and removing more small businesses from the system altogether.

The small business group is also calling on the government to reduce the burden of Employer’s National Insurance Contributions by uprating the Employment Allowance.

It says doing so would, as in years past, ensure that no small business employing four people on the National Living Wage pays Employer’s NICs.

Elsewhere, FSB is reiterating the need to implement measures aimed at ending a £2.5 billion late payment crisis that it says “destroys 50,000 businesses a year”.

FSB National Chairman Mike Cherry says: “We are urging all candidates standing at this election to listen to, and make every effort to understand, the challenges faced by small firms in the communities they hope to represent.”