News

Chancellor forces self-employed into “holding pattern of despair” as controversial tax changes pushed back to 2020

Despite the Chancellor's move to freeze the VAT threshold and bring forward the tax-free personal allowance rise, his decision to roll out controversial off-payroll (IR35) changes to the private sector in April 2020 will have a catastrophic impact on one of the UK’s most productive and dynamic sectors, IPSE said today. 

IPSE’s Chief Executive Officer, Chris Bryce, commented: “The Chancellor has today forced the self-employed into a holding pattern of despair, as they await the introduction of controversial tax changes which could force them out of business from April 2020. 

“The Chancellor’s smash-and-grab approach to taxing the smallest businesses is short-termism on steroids.

“It is a short-term tax grab that will do lasting damage to the economy by taxing out of existence the smallest and most agile businesses.

“These are the very businesses the government and large corporations will need to call upon to provide the specialist skills to navigate our way through Brexit.

“This fresh raid on the self-employed comes only a month after the government backtracked on its pledge to abolish Class 2 NICs, costing freelancers an average of £150 per year.

“The Chancellor’s budget record is stuck on repeat: go for the self-employed, go for the self-employed.

“The Chancellor says this is about tackling non-compliance, but the government’s idea of what ‘non-compliance’ looks like has been overturned by the courts in 75 per cent of cases in the last decade.

“The off-payroll rules are so complex and crude that genuinely self-employed people will be swept up by the government’s smash-and-grab mentality and in many cases taxed out of operation.

“This will have a chilling effect on entrepreneurialism in the UK: if you’re thinking about striking out on your own, as a white van man or a one-woman band, you’ll always be looking over your shoulder, wondering when the government will be coming after you.

“These measures are also profoundly anti-business and anti-competitive. Large, multinational companies who engage contractors will now have the power to unilaterally alter the tax affairs of the smallest businesses – the self-employed.

“The rules also allow big businesses to push their National Insurance obligations onto the self-employed, who end up being taxed like employees without any employment rights.

“Once these smallest businesses have been forced out, the likes of the Big Four service companies – who don’t have to worry about IR35 – will swoop in and pick up all the contracts.

“The self-employed contribute a staggering £271 billion to the UK economy each year, and give the country one of its greatest competitive advantages – flexibility.

“The government’s smash-and-grab mentality will therefore punish the overwhelming majority of genuinely self-employed people, heap a massive administrative burden onto businesses at a time of Brexit uncertainty, and also undermine one of the UK’s most dynamic and productive sectors.

“The fight against this crude and unworkable policy isn’t over. For the sake of the UK economy, IPSE will continue to stand up for fairness and do everything it can to prevent the government from taking a wrecking ball to the UK’s flexible workforce.”

Personal allowance increased:

“It is very pleasing that the government has followed through on a manifesto pledge to increase the personal allowance. It’s a measure that will particularly help the lowest paid self-employed. According to IPSE research between nine and 13 per cent of the self-employed are at risk of being vulnerable – with low pay being one of the defining characteristics. Therefore, increasing the current tax-free threshold from £11,850 to £12,500 as soon as April next year is a major shot in the arm for this group.”

On freezing the VAT threshold:

“While the news will be welcomed by many millions of our smallest businesses – the self-employed – IPSE wants to see the government actually go a step further and increase the VAT threshold in line with RPI. This would resume a historic trend which saw the threshold pegged to RPI from 1980 until it was frozen in 2017. Doing so would give businesses both certainty and the space to grow and thrive – particularly import as the UK’s impending exit from the EU approaches.” 

Extension of New Enterprise Allowance:

“The NEA has the potential to be a great springboard into the world of work and has already helped over one hundred thousand people onto the path of viable work, from the white van man to the one-woman band.

“IPSE is glad the NEA has been extended. Encouraging people into self-employment and to run their own businesses is an overwhelmingly positive thing for the economy, as it lowers unemployment and boosts productivity and Government coffers in the long term."