The sad day of IR35 looms post Covid19 and Brexit

Will the Government open their eyes to the impact that this will have for hard-working knowledgeable consulting resources?

Changes to the off-payroll working rules (IR35) are due to come into force this April 21. The legislation had been due to take effect from 6th April 2020 but was delayed till April 2021. The justification used for the delay last year was …

“This has now been delayed until April 2021 because of the spread of the coronavirus (COVID-19) pandemic. The delay is to help businesses and individuals deal with the economic impact of COVID-19.”

So, what’s changed?

The pandemic is now reaching new heights where the situation and impact to businesses and the UK flexible workforce is much worse. Implementation of this IR35 legislation will be yet another blow to an already struggling flexible workforce that has seen little and at some stages no financial support throughout the pandemic.

“Many people will be hopeful of less business restrictions in April this year in order to start a recovery, but common sense tells me that the implementation of this legislation would be a massive setback to both hard working individuals and the business sector as a whole”, states Craig Ashmole, Founder and MD of London based CCServe consulting. “The Chancellor would probably be respected more in acknowledging this injustice and doing a U-Turn”.

The government seems to be trying to vilify contractors & freelancers, suggesting they perform the same jobs as permanent staff but pay less tax. This is simply untrue. Contractors are often specialists in their field with vast experience and knowledge and operate holding all the risk.

Some examples of differences between a contractor and permanent staffing:

  • Contracts are usually short in duration and can be terminated without reason at short notice
  • Contractors do not receive sick pay, holiday pay or pension contributions
  • Receive no medical insurance, life insurance or any of the other many permanent employee benefits

Due to this legislation, many contractors will be forced to work through umbrella companies and therefore have to pay their own Employer’s NI so immediately lose 13.8% of their rate, even though the Government has always stated an employee should never pay this. When this deduction is taken into consideration along with company tax accountancy fees and self-assessment tax contractors will be paying over 40% in taxes and NI to the government on their whole income. The farce is that this is a much higher rate than a PAYE employee would bring him and the Contractor receives no employee benefits and holds the risk of being terminated at any time.

Introducing this bill will likely result in hundreds of thousands of people losing contract work, as illustrated on the lead up to the originally planned implementation 6th April 2020 when organisations banned the use of Contractors through fear of any tax liabilities being placed on the end client or employer.

Ironically this scenario will actually result in less tax paid to the government as more people will be out of work! Many Ltd company directors have had zero help and support from any pandemic schemes. This will no doubt add to an already increasing unemployment figure as a result of the pandemic as companies start to fold in 2021.

“Many contractors who are often experts in their field and bringing much needed short-term remediation to corporates trying to get Great Britain running again after Brexit and Covid 19 will be lost,” Craig Ashmole goes on to say. “This legislation would be a huge mistake and massive own goal in getting the economy fixed”.

Thanks to Lee McWilliam who started this communication
Having spent a majority of my career working with and supporting the Corporate CIO Function, I now seek to provide a forum whereby CIOs or IT Directors can learn from the experience of others to address burning Change or Transformation challenges.
Craig Ashmole

Founding Director CCServe