Accountants believe that the UK government should support small businesses by postponing the roll-out of IR35 into the private sector, a new survey has found.
In a poll of accountants held by cloud accounting software provider FreeAgent, three quarters (75%) of respondents said that they thought the government should postpone its plans to expand IR35 - or “off-payroll” tax - to the private sector in order to give businesses and accountants more time to prepare.
The survey also revealed that the majority of accountants feel negatively about the controversial proposals, which will require contractors working in the private sector to pay equal taxes as employed workers, but without receiving any of the same statutory benefits. The government insists expanding IR35 will ‘level the playing field’ when it comes to taxation and cut the amount of “hidden employment” - where contractors operate as employees in all but name.
When asked what expanding IR35 would do to the UK’s contracting industry, 87% of respondents said that they believed it would have a negative impact while just 1% said that it would have a positive impact. In addition, 86% said that they did not think that the government had provided enough information about the forthcoming changes.
Alarmingly, more than three quarters (76%) of accountants said they believed that there would be some contractors that will choose to stop contracting altogether once the new private sector IR35 rules came into effect.
Ed Molyneux, CEO and co-founder of FreeAgent, said: “Expanding IR35 into the private sector is fundamentally unfair to UK freelancers and contractors, as it will essentially push them into quasi-employment but without any of the protections that they would receive if they were actual employees. The government believes it is justified in doing this because it thinks many of them are ‘fake’ self-employed workers who do not pay their fair share of tax, but this is simply not the case.
“It’s clear from our research that the overwhelming majority of accountants who work with contractors and small businesses also believe expanding IR35 into the private sector is a bad idea. They think it will have an overwhelmingly negative impact on the UK’s contracting sector and are requesting that the plans be put on hold.
“However, I would go even further than this and urge the government to consider scrapping the legislation altogether. That is the only way to provide some desperately-needed relief to this vital part of the UK economy.”