My letter below (adapted from IPSE template) that I sent to my (Conservative) MP last week, adapted from the IPSE template. I also have a surgery mtg with him later this week.
I appreciate it won't change anything, but I'll be damned if I'm going quietly.
Re: IR35 tax changes will do serious damage to my business
I am extremely concerned by recent reports that the Chancellor is considering changing the way the IR35 tax rules work in the private sector, and may plan to announce this in the Autumn budget statement on 22 November. As a freelancer and small business, dealing with the tax system is always tricky, and IR35 is one of the most complex – and costly – tax laws for small businesses. The proposed change would not only add to the complication; it would also do serious damage to small businesses like mine, as well as the wider UK economy.
It would make it much harder for one or two-person companies to operate on a B2B basis. In fact, it would put me out of business altogether, and force me to consider a legal challenge, at considerable personal cost, just to fight for my right to trade as a bona fide business. Not only that: by harming thousands of small businesses like mine, it would make it much harder for companies across the UK to access the vital flexible expertise they need to deliver projects and drive the economy forward.
The proposed changes would be an extension of the extremely damaging decision the Government took in April to change the way IR35 works in the public sector. This shifted responsibility for determining IR35 status from small limited companies like mine to end-clients. And because judging IR35 status is notoriously difficult, public sector bodies have been unable to make the thousands of complex determinations necessary. Instead, many have just enforced blanket IR35 decisions, forcing contractors – whether they should be under IR35 or not – to pay employee taxes and the employers’ National Insurance charge (an effective rate of around 50 per cent). Effectively this is treating the individual as a deemed employee, yet despite paying these significant taxes, the contractors aren’t entitled to employee benefits such as holiday pay, sick pay, private health cover etc.
Note however that professional contractors are not seeking such employee benefits above. They are happy to absorb these within their own corporate model, but want this recognised as part of the ‘risk premium’ for being entrepreneurs and trading on their own account as a business. By emulating the public sector enforced blanket IR35 decisions in the private sector, the Government immediately unbalances the risk premium against small and micro-businesses. At a stroke, these businesses will find that there is no incentive to continue in business on their own account. Agility, risk-taking and availability of unique skills to client companies will ebb away.
This state of affairs is clearly unfair and highly at odds with the ethos of the Conservative Party. To paraphrase Norman Tebbit, I got on my bike years’ ago to set up an effective small business. I used my initiative and entrepreneurship. Now the Conservatives want to snuff this out. This Conservative government has already driven many contractors out of the public sector, causing serious disruptions to a range of Government projects. In fact, the British Medical Association has declared that “IR35 has been an administrative disaster for the NHS”. It does not surprise me that lawsuits are already being brought against public sector bodies by small and micro businesses because small business operating models have been made unviable.
I cannot imagine why the Government would even be considering extending this ruinous legislation to the private sector, particularly at a period of time pre-Brexit, when the UK economy is entering a period of great uncertainty and more than ever will need a flexible, agile and skilled business model. All we know is that, according to Mel Stride, Financial Secretary to the Treasury, small businesses like mine apparently represent “bogus self-employment” and that he sees an issue of “fairness” to be addressed between contractors and PAYE employees. If fairness is the genuine issue, then why have public sector contractors been forced to work inside IR35 as deemed employees, but without employee benefits? This for me is unfairness (even though the issue is irrelevant to me as a small business).
If the Government does decide to extend this change to the private sector, as I mentioned before, it would force me to wind up my business. By operating inside IR35 I would be working at a net loss. I would also lose my competitive skillset, my freedom to operate an independent business and also achieve a sensible work-life balance. These by the way, are some of the key reasons why small businesses like mine are created – not as HMRC and Treasury would have it, to avoid tax.
I have calculated a number of scenarios where a typical small business like mine may have to swap its tax obligations (Corporation Tax, VAT, dividend tax, income tax, NI) for a full PAYE regime, which is what the proposed legislation will do. Ironically the Treasury would be worse off in terms of tax receipts under the full PAYE model. Has the Treasury really done its sums properly, or is it bulldozing through a populist campaign to bash small business?
I am completely at a loss as to why small businesses – once described by a former chancellor as the “engines of growth” in this country – are being persistently targeted seemingly as the solution to the Treasury’s tax deficit problems. Where is HMRC’s focus on the things that really bring in tax receipts – multinational big businesses avoiding Corporation Tax, the offshore/Paradise Papers situation? I believe it is because the Treasury and HMRC do not have the skills or desire to take on big company lawyers, instead focusing on low hanging fruit like myself who cannot afford to defend themselves. This seems to me to be a highly cynical approach and flying in the face of reasonable review of the facts.
One MP once said:
“We need to focus on the flexibility that microbusinesses and small businesses deliver because they provide a unique adjustment factor in the economy. One reason why the Government’s IR35 initiative has been so damaging and destructive is the fact that it has hit at the most flexible part of the economy.”
Who was that MP, back in the days of a Labour government? Our current Chancellor of the Exchequer, Mr Hammond….
It is beyond disappointing to me that a supposedly pro-business, pro-self-employment Conservative Government would consider such a policy. It is almost as if the Conservatives are declaring war on another hard-working group. The situation is way beyond a cynical tax grab; it is wrecking people’s livelihoods. This is why as a lifelong Conservative voter, I will have to change my vote at the next General Election. I’m not a Labour supporter, but I cannot conscionably give my vote to a party that plans to destroy my business.
An online petition was raised on 07 November: https://petition.parliament.uk/petitions/204121
As I send this letter to you, 9,000 people have signed in one week – a clear demonstration of how serious this issue is.
As your constituent, I urge you to raise these points with the Treasury ahead of the Autumn Budget, and do everything in your power to prevent a policy that would be a disaster both for small business people like me and for the wider economy.
I appreciate it won't change anything, but I'll be damned if I'm going quietly.
Re: IR35 tax changes will do serious damage to my business
I am extremely concerned by recent reports that the Chancellor is considering changing the way the IR35 tax rules work in the private sector, and may plan to announce this in the Autumn budget statement on 22 November. As a freelancer and small business, dealing with the tax system is always tricky, and IR35 is one of the most complex – and costly – tax laws for small businesses. The proposed change would not only add to the complication; it would also do serious damage to small businesses like mine, as well as the wider UK economy.
It would make it much harder for one or two-person companies to operate on a B2B basis. In fact, it would put me out of business altogether, and force me to consider a legal challenge, at considerable personal cost, just to fight for my right to trade as a bona fide business. Not only that: by harming thousands of small businesses like mine, it would make it much harder for companies across the UK to access the vital flexible expertise they need to deliver projects and drive the economy forward.
The proposed changes would be an extension of the extremely damaging decision the Government took in April to change the way IR35 works in the public sector. This shifted responsibility for determining IR35 status from small limited companies like mine to end-clients. And because judging IR35 status is notoriously difficult, public sector bodies have been unable to make the thousands of complex determinations necessary. Instead, many have just enforced blanket IR35 decisions, forcing contractors – whether they should be under IR35 or not – to pay employee taxes and the employers’ National Insurance charge (an effective rate of around 50 per cent). Effectively this is treating the individual as a deemed employee, yet despite paying these significant taxes, the contractors aren’t entitled to employee benefits such as holiday pay, sick pay, private health cover etc.
Note however that professional contractors are not seeking such employee benefits above. They are happy to absorb these within their own corporate model, but want this recognised as part of the ‘risk premium’ for being entrepreneurs and trading on their own account as a business. By emulating the public sector enforced blanket IR35 decisions in the private sector, the Government immediately unbalances the risk premium against small and micro-businesses. At a stroke, these businesses will find that there is no incentive to continue in business on their own account. Agility, risk-taking and availability of unique skills to client companies will ebb away.
This state of affairs is clearly unfair and highly at odds with the ethos of the Conservative Party. To paraphrase Norman Tebbit, I got on my bike years’ ago to set up an effective small business. I used my initiative and entrepreneurship. Now the Conservatives want to snuff this out. This Conservative government has already driven many contractors out of the public sector, causing serious disruptions to a range of Government projects. In fact, the British Medical Association has declared that “IR35 has been an administrative disaster for the NHS”. It does not surprise me that lawsuits are already being brought against public sector bodies by small and micro businesses because small business operating models have been made unviable.
I cannot imagine why the Government would even be considering extending this ruinous legislation to the private sector, particularly at a period of time pre-Brexit, when the UK economy is entering a period of great uncertainty and more than ever will need a flexible, agile and skilled business model. All we know is that, according to Mel Stride, Financial Secretary to the Treasury, small businesses like mine apparently represent “bogus self-employment” and that he sees an issue of “fairness” to be addressed between contractors and PAYE employees. If fairness is the genuine issue, then why have public sector contractors been forced to work inside IR35 as deemed employees, but without employee benefits? This for me is unfairness (even though the issue is irrelevant to me as a small business).
If the Government does decide to extend this change to the private sector, as I mentioned before, it would force me to wind up my business. By operating inside IR35 I would be working at a net loss. I would also lose my competitive skillset, my freedom to operate an independent business and also achieve a sensible work-life balance. These by the way, are some of the key reasons why small businesses like mine are created – not as HMRC and Treasury would have it, to avoid tax.
I have calculated a number of scenarios where a typical small business like mine may have to swap its tax obligations (Corporation Tax, VAT, dividend tax, income tax, NI) for a full PAYE regime, which is what the proposed legislation will do. Ironically the Treasury would be worse off in terms of tax receipts under the full PAYE model. Has the Treasury really done its sums properly, or is it bulldozing through a populist campaign to bash small business?
I am completely at a loss as to why small businesses – once described by a former chancellor as the “engines of growth” in this country – are being persistently targeted seemingly as the solution to the Treasury’s tax deficit problems. Where is HMRC’s focus on the things that really bring in tax receipts – multinational big businesses avoiding Corporation Tax, the offshore/Paradise Papers situation? I believe it is because the Treasury and HMRC do not have the skills or desire to take on big company lawyers, instead focusing on low hanging fruit like myself who cannot afford to defend themselves. This seems to me to be a highly cynical approach and flying in the face of reasonable review of the facts.
One MP once said:
“We need to focus on the flexibility that microbusinesses and small businesses deliver because they provide a unique adjustment factor in the economy. One reason why the Government’s IR35 initiative has been so damaging and destructive is the fact that it has hit at the most flexible part of the economy.”
Who was that MP, back in the days of a Labour government? Our current Chancellor of the Exchequer, Mr Hammond….
It is beyond disappointing to me that a supposedly pro-business, pro-self-employment Conservative Government would consider such a policy. It is almost as if the Conservatives are declaring war on another hard-working group. The situation is way beyond a cynical tax grab; it is wrecking people’s livelihoods. This is why as a lifelong Conservative voter, I will have to change my vote at the next General Election. I’m not a Labour supporter, but I cannot conscionably give my vote to a party that plans to destroy my business.
An online petition was raised on 07 November: https://petition.parliament.uk/petitions/204121
As I send this letter to you, 9,000 people have signed in one week – a clear demonstration of how serious this issue is.
As your constituent, I urge you to raise these points with the Treasury ahead of the Autumn Budget, and do everything in your power to prevent a policy that would be a disaster both for small business people like me and for the wider economy.
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