Steve Brine has written to Chancellor Sajid Javid ahead of the Budget to express his ‘concern’ about the proposed changes to tax rules for contractors and the self-employed.
The former small businessman has studied carefully the thoughts of the very many constituents who spoke to him about this, not only on doorsteps over the General Election, but in many conversations over email and the telephone over the past weeks and months.
The Winchester & Chandler’s Ford MP warned that time was ‘fast running out’ to stop the proposed reforms to IR35, which will come into effect in April, and will in the words of one constituent of his determine whether his business survives. Noting the very noticeable entrepreneurial streak in his constituency, Mr Brine says he has witnessed a growing number of the self-employed who contract out their talents and services, and I could not exaggerate the strength of feeling here.
Up until the proposed legislation change, contractors have been able to determine their own IR35 status with end clients, with the contractor being liable in the event of a mis-determination in status. However, the new legislation sees the end client being responsible for the determination of a contractors IR35 status, meaning they are also liable to be fined in the event of a mis-determination of status.
This proposed legislation change has left a number of very high-profile businesses feeling that using contractors via limited companies is now of high risk.
Mr Brine said: “The financial impact of this is significant. One constituent, operating as a contractor via an umbrella company sees himself being taxed in the same way as a permanent employee, but without any employee benefits such as job security, pension contributions, holiday pay, sick pay or car allowances.
“Another constituent echoed the point, and told me that many organisations have already taken a blanket approach and are no longer awarding contracts to freelance workers. This time, his contract which would normally be awarded for 6 months has been constrained to 5 months, to be terminated in beginning of April.
“This shows that even the very prospect of these changes coming in to force in April is already having real implications for many people who are running small companies.”
Mr Brine goes onto state that contractors are staggered at the fact that although they are contributing more tax by way of Corporation Tax, VAT, Dividend Tax than they would otherwise contribute by way to PAYE and NI contributions, they are being penalised by IR35 changes, and urged the Chancellor to review the proposed changes not only on how they could best be implemented, but on the actual substance of the reforms themselves.
