HMRC’s IR35 must go for the sake of the economy

HMRC’s IR35 (deemed employment) regulations are unfair and creates a ‘double whammy’ for self-employed individuals, such as with the presenters of ITV’s ‘Loose Women’ and should be addressed in next week’s Budget, say tax and advisory firm, Blick Rothenberg.

Robert Salter, Associate Director, Global Mobility, said: “In ordering the presenters to sign contracts, ITV may be looking to avoid any ‘risks’ from a tax angle (rather than making a genuine assessment of whether someone is self-employed or not), whilst ensuring that the individual is only an employee for tax purposes (rather than from a wider HR / labour law perspective).

“In effect, creating the classical ‘double whammy’ for the individuals concerned – i.e. the tax costs of being an employee whilst at the same being self-employed for pension and paid holiday purposes.”

He added: “I would not be surprised if ITV has also been looking to reduce the headline fees payable under the new contracts to account for the fact that by treating these presenters as employees, as ITV will now be liable to employer NICs.

“Whilst ITV cannot impose the employer NIC charge on the individuals directly, if it reduces their agreed fees, it can in effect reach the same result.

“For example, instead of paying them £100 as a freelance contractor with no employer NIC charge to ITV, if it pays them, say£87.90, the overall cost to ITV, including employer NICs – and it is the cumulative cost which matters to them from a budgetary perspective – would still only be £100.”

Robert said: “While some may see this as impacting a few well-paid journalists and presenters, the reality is that many genuine freelancers in all sectors of the British economy are facing similar pressures because of IR35.

“Which is, in effect, lower fees being paid by clients, no employment rights and additional costs. Moreover, in some cases, the situation for contractors is also impacted by clients looking to have projects which probably would have been done in the UK historically being off-shored by companies so that they can avoid the confusion and risk of looking to be IR35 compliant.”

He added: “The present arrangements of IR35 are unfair, and if the Government are serious about encouraging an entrepreneurial economy in the UK and making work pay, they should look at abolishing IR35 as part of March’s budget.”