Chancellor Jeremy Hunt has been criticised for his U-turn in abolishing IR35 reforms, and today’s “budget doesn’t help matters”, according to one specialist.
The decision made by Hunt not to follow through with his predecessor’s pledge to scrap the controversial rules has been condemned by experts, who have accused him of being part of the anti-growth coalition.
Some believe that this decision may lead to the conservative party losing the next general election.
Previous research has shown the current set of rules is putting businesses off using contractors, with some self-employed workers considering retirement or finding work overseas.
Following Mr Hunt’s autumn statement, delivered on Thursday, Seb Maley, chief executive of the tax and IR35 specialist, Qdos, commented: “The self-employed have been buried in bad news recently and this Budget doesn’t help matters.
“The Chancellor speaks about stability and growth, but has abandoned the self-employed, who are critical to ensuring both. Slashing the dividend tax threshold adds insult to injury.
“The government works on the basis that small businesses have pockets as deep as big businesses, and can absorb these freezes and tax hikes. The reality is, many can’t.
“The past few months have been a rollercoaster for contractors, in particular, who were led to believe that IR35 reform was to be repealed – only for the government to cruelly break this promise weeks later.
“At the very least, the government must address the fundamental flaws which continue to plague the IR35 rules and see thousands of contractors forced into zero rights employment.
“If the Chancellor thinks he’s put the issue of IR35 to bed, he’s mistaken.
“After backtracking on the IR35 reform repeal, calls for a review are likely to grow louder.”
‘Short-sighted’ decision from Hunt
Matt Fryer, managing director of Brookson Group has said that the measures announced today result in everyone paying more tax, especially contractors and self-employed workers, describing the budget as “short-sighted”.
Mr Fryer added: “This Autumn Statement and last month’s reversal of the measures announced in the Growth Plan mean that everyone is paying more tax, but this is especially true of contractors and the self-employed.
“Due to the structure of their businesses, independent contractors are particularly hit by today’s cut to dividend allowances and the previously announced increase in corporation tax rates.
“This is short-sighted. The economy needs flexible talent to support growth, including the infrastructure and energy independence projects that the Chancellor has prioritised.
“Contractors are available to work as and when their skills are required and the personal risks associated with this flexibility should be reflected in the tax system.
“Some may decide to seek permanent employment as a result of this budget, but contracting is not just about the money; it is a flexible lifestyle choice.
“If the Government is not going to incentivise the flexible workforce, energy businesses need to consider what else they can do to continue to make contracting an attractive option.
“This might include access to improved services or benefits, in compliance with the off-payroll working rules.”
Budget leaves contractors in ‘perilous position’
Founder of the body for self-employed and independent workers, IWORK, Julia Kermode has said that today’s budget will put those “struggling to make ends meet in an even more perilous position.”
The IWORK founder said: “Many small businesses owned by self-employed people simply can’t afford the minimum wage increase.
“They often don’t pay themselves any sort of wage and, alongside rising energy bills and inflation, this additional staff cost could mean the end for them.
“The Chancellor missed a clear opportunity to help people working second jobs.
“Make no mistake, few people work multiple jobs for fun – they do it to survive.
“Lowering tax and national insurance contributions for this growing group would have made a huge difference.
“Given that millions of Brits now have side hustles – to boost earnings at this tricky time – he could have raised the trading allowance.
“Currently, people can only earn a minuscule £1000 on the side before tax being due on it. Raising this threshold to at least £3000 would have been a smart move and help those most in need.”
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