Independent workers are prepared to move overseas when IR35 changes arrive, despite restrictions that Brexit might bring
There aren’t many people in the UK who think that working and living in Europe post-Brexit will be as easy as it has been in recent years. Anyone considering a career outside the UK faces a lot of unknowns and would think twice about doing it, you might assume.
Not so it seems, according to contractors recently surveyed by Qdos. The majority don’t sound deterred by the potential fallout from Brexit. They feel so strongly about the negative impact of recent and incoming IR35 reform on their earnings that many are considering moving overseas to continue working independently.
Prior to the Chancellor confirming further IR35 changes in the Budget, 58% of more than 1100 UK contractors said they believe better opportunities exist abroad due to the chaos and uncertainty surrounding the legislation – it’s fair to conclude the damaging effects of public sector changes in 2017 will have influenced this attitude.
Apprehension about Brexit (which only 11% of contractors believe will end in a beneficial deal for UK business) and what could result in a frostier relationship across the English Channel might not stop independent workers either. That so many contractors could move to escape what they see as a misguided tax regime tells us a lot about the current mood of hostility towards IR35 changes.
Independent workers have sent a powerful message to the Government; ‘if you won’t look after us, then we’ll live and work somewhere else’. But is this surprising? It shouldn’t be, after years of neglect from an administration that promises to support the independent workforce but has ultimately let it down.
Of the contractors thinking about leaving the UK, 57% said they would do so when IR35 reform is enforced in the private sector. 12% would remain on these shores until they are caught by IR35 (assuming that happens), 19% would head abroad in under a year, while a further 12% see themselves going in twelve months or more.
By the looks of it, this isn’t an empty threat or bravado either. One contractor, who asked to remain anonymous, believes it’s the sensible thing to do. And he hasn’t much sympathy for HMRC, suggesting the taxman only has himself to blame.
“Without a shadow of a doubt, if IR35 starts to impact my bottom line, I will be taking flight and relocating my business. The upshot is the taxman could end up losing far more than he thinks he could gain.”
In the current economic climate, the Government would be wise to start listening to contractors. The UK needs their contribution more than ever. Just recently, economists predicted that Theresa May’s Brexit deal will see the UK take a 4% hit to GDP in the long term.
Private sector companies should also take this seriously because just like the Government and the public sector, they rely on the flexibility and expertise of the independent workforce. When reform is introduced in 2020, these businesses must be able to show contractors they are capable of administering IR35 fairly and accurately. Anything less will drive these workers away.
It doesn’t sound like contractors will wait around. According to this particular individual, who already has an offer on the table, the opportunities abroad will remain irrespective of the final Brexit agreement.
“I’ve had offers to go and work in Stuttgart. A lot of the real estate has been leased by British banks and financial institutions hedging their bets against a bad Brexit. So there is a growing demand on the continent for IT contractors who are native English speakers.”
This sentiment is echoed by Reuters, that reports financial institutions have and will continue to engineer moves away from the UK.
“Brexit will slowly undermine London’s position. Global banks have already reorganised some operations ahead of Britain’s departure from the European Union, due on March 29.”
From the survey, it looks as though contractors are prepared to move with them. Although, when the UK’s transition period out of the EU is over at the end of 2020 and freedom of movement potentially stops, it remains to be seen how this will work in practice. Visa-free travel for business purposes has been discussed, but as is the case with the Brexit deal itself, nothing is set in stone.
However, independent workers are readying themselves nonetheless, explains this contractor, who has run out of patience;
“The whole thing (IR35) is an utter shambles from an IT contractor’s perspective. We are expecting that we will be taxed like employees but can’t enjoy any of the benefits of permanent employment. It will be bon voyage from me and I know there are a lot of other guys who are seriously looking into this.”
The Treasury will take a sceptical view of this threat and won’t react until it has become an actual labour shortage accompanied by persistent public pressure over a period of time from big business. Even then they will deny it is having any kind of real impact and will point to immigration policies which attract skilled workers to the United Kingdom to ensure that there is a ready supply of skills to meet the needs of private industry and the public sector. Governments always takes the view that labour is replaceable.
And in reality, upping sticks and finding a welcoming region offering easy access to lucrative labour markets is full of risk, leaving aside language, cultural, legal, housing, schooling, health care challenges.
Government obtains its relevance from authority, not from competence. It will be a long time before this becomes a lever, if ever.
Already moved. Been in The Netherlands for 4 months. Closed my UK business. Stuff the Tories and stuff Brexit.
That’s interesting. Have you had much experience of the Dutch tax system yet? Several Cloggie friends have come to the UK to avoid high Netherlands taxes.
This is old news, rather than move oversea I just gave up working in 2010. I’ve been a burden on system since, no longer paying Corporation Tax, VAT, Income Tax, National Insurance from my Limited Company. Reducing my expenditure reducing VAT etc as I make very little contribution to the economy. I add to this the non-earner pension contribution paying in £2880 and getting £720 tax relief while most years paying just the odd pounds in taxes.
Leaving is the least of the worries for the Treasury.
Enlightened contractors realise that paying no tax is not a sustainable option for everyone in a viable economy. Doing nothing, earning next to nothing, would seem to be an extreme form of tax mitigation, not to say fairly boring for eight years.
The taxation argument pivots at the level. The government believes it should be as much as possible, partly to compensate for those who pay nothing. Many others think it should be about 20% universally. Flat rate, no ifs, no buts, no blue book, no tax avoidance industry. I keep four fifths to consume and invest as I please, and the government gets a fifth to decorate equine nether regions, run shiny cars for ministers, engage in ruinous projects such as Brexit, buy nukes the supplier wouldn’t allow us to fire and all the other capers which allow it to fondly reminisce about Rule Britannia.
So unless and until they persuade me of the errors of my ways, 20% it is. There’s a lot of water to flow under the bridge before reform in the private sector arrives, including the real possibility of a change in government. It could get worse.
Oil and Gas Contractors have been punished in recent years. In reaction to the oil price slump and elevated production costs due to aging oil platforms, oil companies tightened their belts and in the process slashed contractor rates considerably. This coupled with the government changes to flat rate scheme and dividend taxes has resulted in a rapid decline in a highly skilled, specialised and flexible contracting workforce. “IR35 reform will be the straw that breaks the camels back” for those wishing to continue contracting in the sector. – If this is indeed the desire of the government, then all I can say is be careful what you wish for…
I too have already left, and stated so in my response to the HMRC “Consultation”… I left the UK 3 Years ago when this turd was deposited on public sector.
The fundamental principal of “fairness” of taxation is fine, but also is the fairness of being treated as an employee if you’re being taxed as one, harmonize the definition!
Also fundamental to this is:- If you’re a “disguised employee” you cannot possibly a) Charge VAT on “wages” and b) be liable for any PAYE or Employers NICs as you MUST BE AN EMPLOYEE OF THE END CLIENT, if HMRC are using the “working practices” to judge employment status then it stands to reason that the client MUST be the employer in this relationship!
Anyway, back to smoking a Cuban cigar next to the pool in my tax free new country of residence 😉
The Treasury’s response to this will be: Well that’s two/22/52 delete as appropriate. This government has listened very carefully to the needs of industry and responded with reforms to employment and immigration legislation which ensure that a diverse range of skills are available to meet the needs of our growing economy. Naturally we are always sorry to see people leaving but this government is committed to freedom of choice and we hope they will enjoy the weather in the Netherlands.