As Finance Bill passed...
FreeAgent chief says MPs missed chance to help contractors
Ed Molyneux: many freelancers will be disappointed
A Scottish entrepreneur says MPs have missed an opportunity to help millions of freelancers and contractors by failing to defer a controversial tax reform.
MPs rejected a move by David Davis to delay changes to private sector IR35 for three years in view of current turmoil in the market.
The change to IR35 will allow HMRC to collect additional payment where a contractor is regarded as an employee in all but name.
Critics say it will see freelancers and contractors pay similar tax to full-time employees, despite not receiving holiday, sick pay, or any other benefits.
Tax experts have predicted IR35 could reduce a worker’s net income by up to 25%, costing the typical limited company contractor thousands of pounds in additional income tax and NICs.
The change was due to come into effect last month but was delayed until next April. Mr Davis’s motion asking for a further delay until 2023 was rejected in the Finance Bill which has now been approved.
Ed Molyneux, CEO and co-founder of cloud accounting software company FreeAgent, said that rather than helping to create parity in the UK’s tax system, the reforms will have a “dramatically negative effect” on freelancers and contractors.
The government could end up seriously harming the people it is meant to be helping– Ed Molyneux, Freeagent
“Many contractors will feel disappointed that the motion from David Davis MP to defer the planned private sector IR35 reforms to 2023 has not been implemented in the Finance Bill.,” he said.
“The government had a great opportunity to provide some much-needed relief for this sector during these challenging times, but instead it chose to doggedly push on with an agenda that is likely to harm the UK economy.
“Our own research found that among business owners who actually know what IR35 is, the majority believe that the legislation will have negative consequences for independent workers.
“Deferring IR35 reforms due to Covid-19 could also have represented a good opportunity to completely rethink how we treat our flexible workforce.
“As a nation, we’ve been complacent about acknowledging the challenges and sacrifices that many freelancers, contractors and self-employed people face.
“Now that there is a genuine crisis affecting all areas of the economy, it’s shining a light on how vulnerable these workers are and how we need to protect them.
“By turning down the chance to delay IR35, however, the government could end up seriously harming the people it is meant to be helping.”