The business community hit back at Chancellor Rishi Sunak after he confirmed that reforms to IR35 were going ahead in today’s Budget.
IR35 is a change to Britain’s tax laws that will clamp down on avoidance by targeting contractors for companies who are, in practice, providing the same service as employees.
The change is likely to make more people move to permanent roles, rather than temporary contracting jobs.
The reforms will go ahead in April against a backdrop of concerns raised by business, representative bodies and professional advisers.
A number of businesses have lobbied HMRC to take a softer approach on compliance in the first year of reform.
Chief executive of the Association of Independent Professionals and the Self-Employed (IPSE), Chris Bryce, said: “This Budget is a mixed but overall still gloomy event for most of the self-employed.”
“Just as the government tries to protect freelancers’ incomes with these measures, it destroys their work by forging ahead with the disastrous changes to IR35 despite heavy criticism.”
He warned that changes to IR35 could hollow out the UK contracting industry, as companies declare their contractors “inside IR35” or scrap their flexible workforce altogether.
Tom Evennett, EY’s head of private client services, criticised the government’s lack of detailed consultation on the issue.
“The public sector has applied these rules in recent years with not insignificant challenges.”
“It is perhaps surprising that the government is choosing to press ahead with their expansion without further consultation.”
IR35 expert Qtos attacked the reform as “short-sighted” and “needless”. Chief executive Seb Maley said: ” Given the alarming threat coronavirus poses to the economy, this is not the time to introduce reform that has the potential to irreversibly damage the UK’s contractor workforce.”
Earlier this month the government published a review into the tax changes and confirmed a “light touch” approach to the tax reforms.
In its review, the government said it had listened to the concerns and had changed its approach “where appropriate to better support affected businesses and individuals.”
Founder and chief executive of the Freelancer Club, Matt Dowling, said: “Far from a ‘light touch’, freelancers can expect huge amounts of administration and restructuring upheaval from the policy, which Sunak critically failed to address.”