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Proposals to reform/abolish IR35 could add millions to employment costs

Proposals to reform/abolish IR35 could add millions to employment costs
The Office for Tax Simplification (HM Treasury) has published proposals to reform or abolish IR35, the test which is used to determine a workers employment status.
One of the proposals is that income tax and National Insurance Contributions (NICs) should be merged, thereby removing the tax incentive for being a self employed contractor.
Ann Swain, Chief Executive of the Association of Professional Staffing Companies (APSCo):
Limited company contractors are a vital component of the UKs flexible workforce. Any changes to IR35 that make contracting less attractive would cost UK plc millions in additional employment costs.
Its rather disjointed that the Government is trying to make it easier for businesses to take people on while at the same time it is suggesting making freelance working less attractive, thereby potentially increasing employment costs!
Merging tax and NICs would erode the tax advantages of contracting. Contractors do not get the same rights as employees, so they need to be compensated for that. Eroding contractors tax benefits would make contracting considerably riskier and put many people off.
APSCo was founded in 1999 to lobby against the original IR35 proposals. Any changes to IR35 need to ensure that flexible working is attractive and encourages the entrepreneurial spirit.
IR35 needs to be reformed, but the Government needs to be careful that any alternative test is a genuine simplification and does not create the same uncertainty.
In the IT and engineering sectors, because of the nature of project cycles, contractors are an absolutely vital resource. These are two sectors of the economy that the Government needs to be promoting. Undermining the contractor base which these sectors depend on would be hugely damaging.


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