Government must reassess tax raising policies, IPSE says

• 23 Jul 2018

The Government should immediately reassess tax raising policies following research which claims that UK taxpayers are being burdened with higher bills than at any time in the last fifty years, IPSE (the Association of Independent Professionals and the Self-Employed) said.

The research, released by the pressure group, the TaxPayers’ Alliance, found that the tax burden – which is the amount of tax paid to the Treasury as a proportion of total annual income – this year is at a 49-year high, at 34 per cent of GDP.

The first policy the Government should abandon is the proposal to extend last year’s IR35 reforms to the private sector, IPSE said.

IPSE’s Director of Policy, Simon McVicker comments: “The self-employed have had more than their fair share of tax hikes under this Government. The cut to the dividend taxable allowance has meant a significant real term increase in the tax bills of many independent professionals.

“Worse still, last year’s IR35 reforms have resulted in thousands of public sector freelancers being wrongly taxed as if they were employees while receiving none of the employment rights. Now the Government wants to extend that same change to the private sector, a change that threatens to strangle the UK’s greatest competitive advantage – it’s flexible labour market. People don’t mind paying taxes if they are fair and transparent – the problem with IR35 is that it is anything but fair.

“The Government’s zeal for raising tax, as highlighted by the TaxPayers’ Alliance, seems to have taken precedence over traditional Conservative principles of driving economic growth by allowing people to keep more of the money they earn.

“Everyone understands that we need to fund our public services, but the Government is in danger of killing the goose which lays the golden egg, namely the UK’s 4.8 million self-employed who enable innovation by providing flexible expertise to businesses which are looking to grow.”

From April 2017, public sector organisations have had to assess their contracts with self-employed individuals for IR35 – rules which govern how tax is paid on those engagements. If IR35 is deemed to apply, PAYE and National Insurance is due, as it is for employees. The IR35 rules have been heavily criticised for being too complex, leading to fears that many engagements have been incorrectly assessed.