Freelancer body IPSE has urged the Government not to extend the changes to IR35 self-employed tax regulation into the private sector.
The warning has come as part of IPSE's response to the Government's "Off-payroll working in the private sector" consultation. The key issue being considered is the extension of the Government's reform to IR35 tax law from the public sector to the private sector. It essentially shifts responsibility for determining IR35 status from self-employed individuals themselves to the clients who engage them.
IPSE said that pushing the change out into the private sector would heap a greater administrative burden onto UK businesses, reduce productivity and further complicate employment status law. It has also raised concerns about the reliability of HMRC's CEST (Check Employment Status for Tax) tool.
Andy Chamberlain, IPSE's deputy director of policy, said: "Extending the changes to IR35 to the private sector would be extraordinarily short-sighted - especially now. If you believe many economists, the UK is already staring into a Brexit-shaped abyss. Why would the Government want to introduce a measure that will damage one of our greatest competitive advantages: our flexible economy?"
Recent research by IPSE and the CIPD has shown that IR35 changes have already caused problems in the public sector, including walkouts, project delays and cancellations. "There are many more self-employed people in the private sector, so the damage from this could be far more significant," said Chamberlain. "Not only would the changes be a major administrative burden for private sector clients; they would also limit businesses' access to skilled flexible labour and ultimately drive down productivity.
"There is already widespread confusion about employment status law in the UK. Taxing more self-employed people as if they were employees - without giving them any of the employment benefits - would only add to this and further complicate this tangled issue. Therefore, with Brexit hanging over the country, IPSE's response to the Government's consultation was clear: don't do it, and definitely don't do it anytime soon."