Contractors face dual Budget 'raid' on IR35 and Entrepreneurs’ Relief
Contractors should brace themselves for a ‘two-fold hit’ from both IR35 and Entrepreneurs’ Relief changing for the worse at today’s Budget 2020, experts now agree.
On the back of Nixon Williams warning reform to both measures will significantly dent take-home pay if Rishi Sunak unveils it, Qdos and WTT Consulting say the chancellor is bound to.
“Entrepreneurs’ Relief will go,” says WTT’s Graham Webber. “[And] we will see IR35 [reform] introduced. [Oh, and] nobody I speak with believes anything about a ‘soft landing.’”
Seb Maley, who specialises in the off-payroll rules agrees. “There seems very little chance that the chancellor will suddenly change his mind [on IR35] and announce a delay.
“[And] much has [also] been made about what the future holds for Entrepreneurs’ Relief.
“If Rishi Sunak scraps this," he says, "some contractors -- who are considering closing their limited companies due to IR35 reform -- would be hit two-fold.”
Trying to find some upside for PSCs, Mr Maley pointed out that, according to the Tory party manifesto, there will be no announced increases in income tax, VAT or National Insurance rates.
'Press the button hard'
But speaking on the condition of anonymity, a veteran recruiter believes it is precisely because of this tax-freeze pledge that contractors are in the crosshairs.
“We have a government committed to no increases in income tax, corporation tax and VAT who want to embark on some big infrastructure projects,” the recruiter said.
“That, plus a new, inexperienced chancellor means that they will today press hard on any button which looks like it will bring in more tax revenue.”
'Treasury thinks contracting is fit for raiding'
An expert in HMRC disputes, WTT's Mr Webber, believes that such a button in the eyes of No 11 Downing Street is the limited company workforce and its partners.
“The Treasury has clearly identified the contracting sector as one that can be raided under the guise that as contractors do the same job as employees, they should pay the same tax.
"[But] often," he says, "PSCs do jobs that employees do not -- and usually because they are niche specialists who may not need to be on the payroll for long. But equal pay should mean equal benefits.”
'Killing the goose that lays the golden egg'
Mike Hampson, CEO of Bishopsgate Financial condemned: “The chancellor [looks set on] killing the goose that lays the golden eggs, by not being supportive of small businesses.
“These firms are driving the economy, creating jobs. But then again, he comes from a privileged background without any experience of the realities of running a company.”
Editor’s Note: ContractorUK will be publishing the chancellor’s full Budget 2020 speech as soon as it available today, ahead of experts’ reaction and analysis – with coverage both today and tomorrow.