My message to buoyant Boris Johnson on behalf of a crippled contractor workforce

It was a previous prime minister who said, ‘A week is a long time in politics.’ Well, it’s only been three days since the current first Lord of the Treasury was elected and it already feels like a lifetime.

Timings actually hold the key to unlocking the message that our contractor sector needs to shout loud and clear from the rooftops if No 10 and Westminster are going to actually listen and act, writes Julia Kermode, CEO of the Freelancer & Contractor Services Association.

On Friday morning, Boris Johnson walked back through the door of 10 Downing Street, carrying with him a very long agenda along with the commitment to ‘get Brexit done,’ whatever that might look like in reality. 

But it was in the last few weeks that the Conservative party promised to review the April 2020 off-payroll reforms and we – our organisation and other organisations, plus you as individual contractors, must now hold him to account. 

There are just over three months to go before the reformed IR35 legislation is to be rolled-out to the private sector. This equates to very little time for a full, meaningful and proper assessment to take place, followed by almost no time at all to implement the findings of that review. 

And, in February or March, the new Tory government is planning a Budget, which would presumably include the final legislation to implement ‘Off-Payroll Working in the Private Sector.’

Again, timings -- rather than events -- are the key. It leaves it all far too close to April when the divisive legislation is due to come into force, Monday 6th. Surely, this must mean the government needs to announce a postponement and delay, due to this impossibly short timeframe? If they don’t delay, their promise to review IR35 reform risks going down in history as a cynical, arrogant and disingenuous move to secure the contractor sector’s vote.

What’s unfortunately happening right now due to private sector IR35 reform

We are already seeing the very real impact of this unwieldy legislation on droves of businesses and thousands of limited company contractors. So a review of the legislation is welcome, of course, but it is cold comfort for the many contractors who are already being hit by the ruthless stance that some mid-sized and large companies are adopting. 

Over the last few months, many such engagers of PSC contractors are simply terminating their contracts in favour of a payroll-based engagements at the same overall assignment rate, so without the usual uplift for Employers NICs and overheads. 

This spells a double whammy for contractors who are effectively funding the Employers NICs as well as the Employees’ deductions. Contractors are being faced with a stark choice – either accept the offer -- along with a significantly reduced income, or not work for that company whatsoever. Livelihoods of freelance professionals are effectively being put between a rock and a hard place. All the while, HMRC has said that the legislative changes should not, and will not affect those contractors who are genuinely self-employed. The reality is that the way engagers are responding to those legislative changes are unfairly penalising some of the UK’s hardest-working, independent, and enterprising professionals.

Reforms – that our freelance sector actually require

I therefore hope that the government uses its mandate to deliver on the Good Work Plan. One of the commitments was to regulate umbrella firms from April 2020 and we are yet to see any draft legislation. And once again, time is running out. Maybe Westminster doesn’t know, but there are many sham ‘umbrella’ firms opening up in business with the sole, specific aim of cashing in on the April off-payroll reforms.

These sham firms should be an absolute priority for Mr Johnson’s crosshairs, lest we will see a slew of tax avoidance arrangements wreaking havoc -- once again -- on the lives of innocent people. It really is along the lines of what we have seen with Loan Charge 2019 and so surely, there is no stomach from officialdom to repeat this debacle?

Cracking down on tax evasion and avoidance has to be looked at seriously and the Tory party has promised to deliver on this, even suggesting they will go as far as passing a law to increase prison sentences to 14 years for any individual who is convicted of the worst form of tax fraud. Despite some of the public’s perception of the freelance workforce, as that workforce’s representative body, we regard these proper sentence as a fantastic and long overdue development.

The perpetrators of tax avoidance should be dealt with robustly and such a commitment by the government might be just the incentive that serial tax avoiders and scheme promoters need to stop once and for all. Yet, any new legislation will need rigorous enforcement so we would hope that the government is planning to invest sufficient resources to allow HMRC to take decisive action. 

The (lethal) Loan Charge

Contractors are all too aware of the impact that the blunt Loan Charge has had on some of their contracting colleagues who have been unwittingly caught in the middle of a tax avoidance scheme. Now we have clarity regarding who is in government, hopefully Sir Amyas Morse can report back his findings from the Loan Charge review with the urgency his recommendations deserve. There are thousands of contractors facing severe anxiety, relationship breakdown, bankruptcy (and worse, suicidal feelings), who are hanging on his findings as a lifeline. It is unthinkable to insert more time here, or delay – the impact on those individuals is life-changing; lives have already been lost and months more of severe worry and distress could lead to more bereaved families. 

Delay, delay, delay to avoid potential decimation

Turning to other pledges by the Tories, our association regards it is as welcome that they will not be raising income tax, National Insurance or VAT and every individual will be better off, thanks to them increasing the NIC threshold to £9,500 in 2020, up from the current £8,632. 

However, the planned cut to the rate of corporation tax from 19% to 17% from April 1st 2020 has been put on hold which will impact those contractors continuing to work through their own limited company. I doubt that many contractors will have been relying on that planned decrease, yet it would have been appreciated, given the potentially significant impact the Off-Payroll legislation will have on their businesses and careers.

Standing back from it all, the Tories purport to be ‘the party for small business,’ but they have imposed a barrage of red tape and legislation on contractors over the years in their mission to shore up the Treasury’s coffers.  We are already seeing collateral damage in relation to the 2020 off-payroll changes, unfortunately exactly as we predicted. We now run the risk of a meaningless review of IR35 – a review that overlooks or neglects the real-world, practical and financial impact of the changes, which may only exacerbate the situation. My heartfelt message to Mr Johnson and his incoming ministers is to support not stymie our freelance and contractor sector. That means this -- if the government wants to avoid utter chaos and shambles, and a potentially decimated freelance and contractor workforce, they must take decisive action to delay the planned reforms to IR35.

Profile picture for user Julia Kermode

Written by Julia Kermode

Julia Kermode is Chief Executive of the Freelancer and Contractor Services Association (FCSA), the market-leading membership body for umbrella employers, contractor accountants and CIS payroll service providers that specialise in supporting the contingent workforce.
Printer Friendly, PDF & Email

Sign up to our Weekly Newsletter

Keep up to date with everything in the world of contracting.

 

Contractor's Question

If you have a question about contracting please feel free to ask us!

Ask a question