Warning of ‘contractor exodus’ over rule change
The Chancellor’s attack on tax avoidance by contractors will make things harder for the self-employed and could lead them to flee Britain, according to experts.
Determining a worker’s employment status is complicated and is significant, as contractors typically pay less tax than full-time employees.
The Budget widened the scope of changes to a hated piece of tax law known as IR35, which aims to stop “disguised” employees claiming they are contractors to avoid tax.
The change shifts the responsibility for determining employment status from the contractor to the employer. Large and medium-sized private-sector employers will be brought into the net in 2020. Implementation in the public sector has been strongly criticised by contractors’ bodies.
Richard Wallen, 61, a contractor from Hertfordshire, said determining whether you should be an employee was complicated and that the “whole process needs sorting out”.
Dawn Register, of accountancy firm BDO, agreed. “IR35 has been around since 2000, so the fact we still have cases like some we have seen going through tribunals shows it doesn’t work.”
Research from Qdos Contractor, an insurer, suggests that as many as 58pc of contractors will strongly consider leaving the country in 2020 when the changes take effect.