Businesses have angrily opposed a proposal made by the government that would determine whether a worker is classed as self employed or employed.
The proposed plan is set to begin in 2020, and the government have indicated that these changes need to be made in order to combat tax avoidance.
What Are The Government So Concerned About?
HMRC have concerns that there are companies in the private sector that are hiring staff as self-employed, when in actuality they should be hiring them as employees.
This is called ‘disguised employment’ and companies are benefiting from having workers classed as self employed. If they were employees they would be taxed more heavily.
These IR35 rules have been in place since the year 2000, and the new proposals below seek to build on these rules.
HMRC’s New Proposal
From April 2020, all companies will be required to assess the employment status of any contractor they use. The exceptions will be companies who:
- have fewer than 50 employees
- Or less than £10.2m annual turnover.
Currently, contractors assess for themselves whether they are subject to IR35. However under HMRC’s new proposals, if a company believes a contractor should be treated as an employee, it will be liable for deducting the correct tax. This includes income tax and national insurance.
Businesses Are Angry, So Why Are HMRC Proceeding?
HMRC face a real problem when it comes to ‘disguised employees’.
This is losing the economy money. Letting workers remain self employed (when in actuality they should be employed) it will approximately cost the taxpayer up to £1.3 billion by 2022.
However, the business who are opposing these changes have been doing so for a while now. They are not backing down, because they believe that it will negatively impact both businesses and those who are self employed.
Who Will This Proposal Impact?
The uncertainty surrounding Brexit has already had an impact on freelancers. Many believe that more legislation will only have a negative effect on their freedom moving forward.
There are also worries that businesses will class those who are genuinely self employed, as employed. Companies would rather avoid making mistakes as they are now liable.
The backlash to this proposal has not ceased, and businesses seem intent on continuing their uproar.
HMRC are set to close their public consultation in May. It will be interesting to see if they push forward their plans or adapt their proposal.
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