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Press reports predict IR35 clampdown in Budget
by Susie Hughes at 12:17 12/10/18 (News on IR35)
Press reports are predicting that the Treasury is finalising plans to overhaul tax rules which allow self-employed people 'to avoid paying national insurance contributions'.
In the type of language often used by Treasury officials and politicians, the BBC says that it will be targeted at people who set themselves up as private companies to take on work, and that this is likely to be announced in this month's Budget.

It is not unknown for the Government to 'kite-fly' proposals prior to their official announcement to see the reaction, or to go on to introduce a more moderated proposal which is then greeted with relief.

It has been feared but expected that the Government will take action against freelancers in the private sector, after previously tackling the practice in the public sector, and also holding a consultation during the summer.

The freelancer sector has been critical of the manner in which the public changes have been ingtroduced and have called for caution before rushing into similar moves in the private sector.

The BBC reports that the Treasury believes a third of people claiming self-employed status as a 'personal service company' are actually full employees and should pay more tax.

It says without reform, high levels of non-compliance with tax rules could cost HM Revenue and Customs £1.2bn a year by 2023.

Like in the public sector, it is thought that the Treasury will put the responsibility for identifying status and compliance with the end-client.

Despite the controversy over the public sector rules, HMRC claims that this action on so-called 'synthetic' self-employment has raised £410m extra in taxes since 2016.

FCSA - Inaccurate figures
Not surprisingly, this has been met with criticism by the freelancer community.

Supply chain representation group, The Freelancer and Contractor Service Association (FCSA) also queried the accuracy of the figures quoted.

Julia Kermode from FCSA said: “HMRC cannot have properly considered the huge number of consultation responses it received to make any informed decisions about Off-Payroll in the run up to this month’s budget so it is a bold prediction by the BBC.

"What’s more the often-quoted £1.2bn figure is based on incorrect assumptions detailed in the Office of Budget Responsibility’s Fiscal Risks Report from July 2017. According to the OBR, their assumption is based on 15.7 per cent of the UK workforce being self-employed by 2021 but the current rate is 14.8 per cent and the rate of self-employment is not increasing as quickly as it has done in recent years, so is unlikely to reach their forecast.

“The OBR figure also assumes that the rate of incorporations will continue rising by four per cent annually, however it is just 3.5 per cent. Whilst these deviations from OBR figures might seem small, they will in fact have a sizeable impact on the fiscal projections, as OBR themselves admit in their report. The impact of both of these inaccurate forecasts means that HMRC's projected £1.2bn loss is wholly inaccurate.

“It is incredibly frustrating that policymakers justify their decisions on figures that are shaky at best, without properly considering the detail behind those figures, let alone the devastating impact on the UK economy.”

Further information
For more information about the controversial IR35 tests and rules; and other aspects of IR35, see Shout99's News on IR35 section.

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Susie Hughes © Shout99 2018

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