IR35: Campaigners welcome delay to private sector tax shake-up, but say business costs will increase

 
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Freelancers will have to pay more in National Insurance Contributions and income tax under IR35 (Source: Getty)

Industry experts welcomed the chancellor’s decision to delay a tax clampdown on self-employed private sector workers today, but claimed it would still hurt businesses when it is introduced.


Changes that seek to tax off-payroll workers as full-time employees won’t hit the private sector until April 2020, Philip Hammond announced in his autumn Budget, after a public consultation could have seen them introduced in early 2019.

The IR35 rule is already in force in the public sector, and forces contractors who supply their services via a limited company to pay the same tax as full-time employees if they would otherwise count as an ordinary member of staff.

However, such workers do not benefit from holiday and sick pay.

“Last year, we changed the way these rules are enforced in the public sector. But widespread non-compliance also exists in the private sector,” Hammond said.


“So following our consultation, we will now apply the same changes to private sector organisations as well. But after listening carefully to representations made during the consultation, we will delay these changes until April 2020.”

“A delay will give businesses and freelancers time to prepare for the inevitable complexities of implementation,” said Julia Kermode, chief executive of The Freelancer & Contractor Services Association.

However, she also warned that big businesses would still struggle to make the IT changes necessary to ensure IR35 contractors’ invoices are taxed correctly.

“Businesses will need to start planning their IT development very soon, at the same time as grappling with the implications of Brexit,” she said. “The government claims to be supportive of businesses but they are not making things easy for them.”

Dave Chaplin, founder of Contractor Calculator, which offers advice to self-employed workers, accused Hammond of slapping an extra 10 per cent onto the cost of hiring self-employed staff.

“This [roll out] is still premature until the full facts of the public sector impact have been established, which won’t be known until the middle of 2019,” he added. “By then we expect to see evidence that the reforms have been damaging to the public sector, raised costs, and effectively resulted in a net loss.”

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