A quote from way back

[BoredBloke]

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.

Any guesses who said that?

Small Business (Regulatory Burden) (Hansard, 6 November 2001)

[WordIsBond]

However, a large number of small businesses will never be anything other than just that. Many of them are one-man, self-employed enterprises. They, in particular, deliver a swing capability to our economy that is vital to the fast-moving responsiveness that we need if we are to continue to be flexible.

I am sure that the Chancellor would recognise that as the economy and the fortunes of firms move, they must be able to adjust the costs that they bear. The one-man business is uniquely able to adjust its cost in response to the changing environment: it makes more money one year, less the next. Typically, such a business will not require large streams of investment capability, so it can absorb changes in the environment in a way that larger and more structured businesses cannot.

One of the most egregious parts of IR35 is that you can't smooth out your personal income, as far as tax is concerned. If you make more money one year, you get pounded on tax even if you don't make any the next year. You are personally taxed on business income rather than on personal income.

If they increased dividend tax rates to 10% or even 12.5% on close companies, to reduce tax-motivated incorporation, and then abolished IR35 as no longer needed, at least you'd have the ability to flexibly run your business.

[NotAllThere]

If they increased dividend tax rates to 10% or even 12.5% on close companies, to reduce tax-motivated incorporation, and then abolished IR35 as no longer needed, at least you'd have the ability to flexibly run your business.

This is pretty much how it works in Switzerland - there is simply no tax relief on dividends. It is treated as income. I declare dividends and retain income during good years, pay only salary in bad years.

[BoredBloke]

The point In was trying to make with his quote was that Hammond is clearly criticising IR35 for its effect on making the economy less flexible, when it was tory party policy. Fast forward and he is the chancellor and he makes it many times worse by removing any ability to offset travel and accommodation costs against tax.