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Tax Changes Needed for Contractors, Says IPSE

The tax changes needed for contractors - Image

Simon McVicker, director of policy at the Association of Independent Professionals and the Self-Employed (IPSE) has issued warnings that Government policy is having a negative effect on contractors in the UK.

He said: “I’m worried the Government is trying to prevent people from working in a flexible way. Recently, it’s put the gig economy under intense scrutiny and made much of the concept of false self-employment. Taken together with the recent changes to taxation – most notably the public sector IR35 reforms – it’s almost as if the Government is intent on making it extremely difficult to be self-employed.”

Confidence is down

Confidence levels among contractors is on the decline. The IPSE’s Freelancer Confidence Index for the second quarter revealed that this was the lowest level of confidence on record. Only 19% of freelancers said they were confident about how their business will do in the next 12 months. This is a decrease of 9% from the first quarter this year.

Over half (52%) of respondents to the survey said that they have less confidence in their business than ever before. McVicker highlights two major reasons for this: Government tax policy and Brexit uncertainty.

Government policy

IR35 has been met with a lot of confusion and divided opinion. McVicker said that the reforms have had an overall negative effect on the public sector.

According to a survey from Contractor Calculator, 27% of contractors said they were planning to leave the public sector because of IR35 changes. 17% also said they were considering leaving.

“I think there’s a general mistrust of the Government at the moment. You get the impression not just that it doesn’t understand the self-employed, but that it’s actually unsympathetic towards them too,” McVicker said.

“I don’t think the new regime is going to work as well as the Government expects. I don’t think it will bring in the anticipated revenue. When a project is postponed because of contractors leaving, it means other contractors will need to be drafted in further down the line. Whether or not they will be available remains to be seen.”

Brexit effect

McVicker also says that the economic uncertainty surrounding Brexit is harming freelancers and contractors. However, he suggests that Brexit could end up creating opportunities in the long-term.

“In some ways, I think Brexit is going to be a big opportunity for UK freelancers. If we implement the immigration controls that are being talked about, the UK won’t have the skills needed for a lot of jobs, so all of a sudden there will be a lot more demand for the flexible workers who remain.

“So I think this pessimism is largely an immediate gut reaction to Brexit. But if there are more opportunities two years down the line, contractors may well change their minds on that.”

However, the potential for success among contractors depends on the market remaining flexible. This is something he says is currently under threat from Government policy. “The Government must make sure the UK economy remains flexible. For some time now, flexibility has been the UK’s key competitive advantage, and you would have thought the Government would be intent on sustaining it.

“But instead, it seems to be trying to regulate and tighten the labour market, forcing many people out of self-employment. It’s a great concern not just for the self-employed but for the country at large,” he said.

 

Do you think the government’s take on policy is right or do you agree with McVicker? Let us know what you think in the comments.

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