A fortnight in which the Treasury dropped their biggest hint yet that IR35 reform will be extended to the private sector, UK freelancer and contractors have called on the Government to apply greater pressure on big businesses suspected of tax avoidance too.
Just last week, Mel Stride, Financial secretary to the Treasury, told The FT that the possibility of extending new off-payroll working rules to the private sector was “an issue of fairness”, which all but confirmed contractors’ fears that further IR35 reform now looks inevitable.
Amid ongoing speculation, a staggering 95% of independent workers understandably want HMRC to look closely into the taxation of big businesses too.
Faced with the choice, contractors, recruiters and private sector companies would rather not see IR35 changes introduced. But given HMRC and Government seem intent to press on without acknowledging or learning from their recent failings, our sector needs clarity.
In addition to this, it’s entirely understandable that contractors expect big businesses to face the same kind of scrutiny from HMRC which they have been put through recently.
As millions of contractors prepare for potential IR35 reform, not to mention any new tax laws in the Budget this month, global companies with a large presence in the UK continue to find ways around paying corporation tax on these shores. An article published earlier this year suggest that multi-billion pound companies such as Vodafone, Gap, EE and Waterstones continue to find tax loopholes and declare losses to avoid paying corporation tax.
And just this week The Guardian reported that almost 40% of corporate investments deliberately channelled into tax havens, travel right through the UK.
This simply adds fuel to the fire that more must be done to combat tax avoidance from large businesses. Yet another tax grab on the self-employed would simply be short-sighted. Surely it’s time the Government focused on preventing foul play from big corporations?
In a previous Budget, The Chancellor spoke of rebalancing the tax system. Perhaps then, the Government should keep their promise and put big businesses under similar scrutiny which the self-employed have been made to endure.
Reports of continued tax avoidance by big corporates have justifiably angered contractors, who feel as though the Government is not behind them, as they gradually reduce the financial benefits of working independently without offering anything of real substance in return. This is an opinion held by a telling 95% of contractors, according a Qdos Contractor survey.
April’s public sector IR35 reform arguably contributed to 65% of independent workers’ opinion that UK does not currently have a ‘pro freelancing or contracting’ Party in power. Further amendments to IR35 legislation might well be the nail in the coffin for The Conservative Party.
Unnecessary changes to public sector IR35, along with the prospect of private sector changes, would have been the driving force behind 92% of contractors to voice concerns that they believe the Government see the self-employed as a soft target.
With 2million independent workers in the UK, freelancers and contractors contribute over £119bn to the economy each year. By the Government’s own admission in the past, freelancers are key to the economy, so why would they want to risk further jeopardising what is already a fractured and turbulent relationship?
As the UK heads into unchartered Brexit territory, you would think Theresa May and her Cabinet would be looking to give the UK self-employment a boost. Uncertainty surrounding the UK’s exit from the European Union is no good for business, while freelancers and contractors are clearly key to it. Some much needed support for the UK’s independent, flexible workforce wouldn’t go amiss. After all, it would be in the Government’s own interests.
Despite persistent rumours which surround IR35 legislation and the future of the tax system, 61% of contractors remain optimistic that this way of working can not just survive private sector reform, but actually continue to grow.
That said, it’s clear the Government needs to address the concerning disconnect between themselves and UK contractors, who, at this very moment are bracing themselves for a rise in IR35 investigations and inaccurate contract assessments should reform hit the private sector.
One way to alleviate some of the stress that together HMRC and the Government has caused freelancers and the self-employed, is to fair up the system. If the self-employed are quite obviously being targeted, then why isn’t more done to actively tackle suspected tax avoidance by big businesses too?