'Self-employed face inflationary pressure if IR35 changes'
Many self-employed people would not only be unfairly taxed as employees if IR35 reforms were extended to the private sector, they would also be hit by inflationary pressure too.
The Association of Independent Professionals the Self-Employed (IPSE) issued this warning, in light of Britain’s headline rate of inflation holding steady in June at 2.4 per cent.
Although costs not increasing has previously been welcomed by the association on behalf of its self-employed members, it pointed out that currently, inflation is above its 2% target.
And it has been since April, seeming to tally with the 78% of freelancers who have predicted to IPSE that costs they incur for their one-person business will rise in the next 12 months.
Ominously, an incoming government response to a consultation could end up driving up costs even more, both directly for freelancers and indirectly, by adding to their clients’ costs.
IPSE’s Tom Purvis explained: “The government must avoid introducing policies that would increase inflationary pressure -- not least extending the changes to IR35 to the private sector.
“Not only would this increase costs for businesses and put a further squeeze on living standards; it would also leave many self-employed unfairly taxed as employees.”
The latter concern about freelancers being unfairly taxed as staff is based on what happened in the public sector, when the IR35 changes were introduced in April 2017.
Rather than assess the status of their freelancers on a case-by-case basis, many end-users saved themselves the time – but ultimately increased their own costs – by putting their freelancers on their payroll.
Freelancers and other affected parties have until August to respond to the consultation, although in the public sector, clients started adding freelancers to the payroll before the commencement date.
Currently, IPSE pointed out that the main contributor to inflation is, ultimately, the increasing price of oil of late.
Despite seemingly far removed from the life of the freelancer, the rising ‘per barrel’ price ends up being a significant squeeze on those who work for themselves.
“The rising cost of transport particularly affects freelancers because they travel more than their employee counterparts,” Mr Purvis said. “This is because they have to travel to clients -- and to win work.”
18th July 2018