Proposed and recently introduced tax rules in the contractor sector should be axed or amended in light of Friday’s EU referendum result, experts are warning.
Chris Bryce, chief executive of IPSE (The Association of Independent Professionals and the Self-Employed ), says negotiating a withdrawal from the EU is not the time for Britain to change how its public sector operates IR35, as it plans to do from April.
“[Because] we are renegotiating our exit,” Mr Bryce said, “the government’s proposed changes to IR35 should now be dropped completely.”
He says cutting red tape on contractors so that the UK can have “the most flexible” economy is vital since the vote for a Brexit, which Pantheon Economics predicts will cause a recession.
‘Relief for all’
Adrian Marlowe, chairman of staffing group the ARC, agrees that unshackling contractors from regulations – notably those that hit their expenses in April – should now be a priority.
“[In wake of the ‘Leave’ outcome, the government should now] permit tax relief for all agency workers on home-to-work travel subject to suitable limitations,” he said.
“This means the same tax rule for all those who find supply work through agencies regardless of status, e.g. limited company, self-employed or otherwise.”
Implementing the move, which would likely require April 6th’s T&S legislation to be amended, would “provide massive simplification and support employment,” Marlowe said.
The argument against the tax relief concept voiced to us by HMRC was that it would not be possible to implement because of the EU State Aid rule, however with the new post-Brexit reality this argument falls away.
‘Care should be taken’
The ARC chair, who is the boss of recruitment law firm Lawspeed, also called for caution ahead of any revisions to EU directives, which pro-Leave firms will be keen to see made.
“[EU] regulations in place [in the UK] can be changed, but whether or not they should be changed is an entirely different question,” Marlowe said. “Care should be taken before calling for the abandonment of directive-driven rules such as the Agency Workers Regulations.”
One legislative change advocated since Britain is quitting the EU pertains to the public and non-profit sectors, where it is suggested the VAT ‘staff hire concession’ should be reinstated.
‘Prolonged period of readjustment’
Kevin Green, chief executive of the REC, understands why the recruitment sector is eagerly submitting its suggestions for the UK to have a smooth transition to independence from Europe.
“There will be a prolonged period of renegotiation and readjustment,” Mr Green said after Friday’s ‘Leave’ result. “During this time government needs to do everything possible to help businesses to grow and create jobs.
“That involves outlining a timetable of renegotiation to help organisations make informed strategic decisions. We call on policy-makers to set out the plan for implementing changes to employment regulations such as the Agency Workers Directive”.
But such a timetable shouldn’t be hastily compiled, according to most company directors. Rather, “getting a good deal” should be prioritised over wrapping it up speedily, say 51% of company bosses polled by the Institute of Directors.
“A majority of business leaders think the vote for Brexit is bad…[so their] plans for investment and hiring are being put on hold or scaled back,” the institute said. “[But] firms are willing to be patient… [they think] cool [negotiating] heads will be needed.”
‘Short term volatility’
A similarly downbeat investment forecast was sounded over the weekend by Mike Rake, chairman of BT and a vocal Remain campaigner in the run-up to the referendum.
“Businesses will hold back on investment in the short term volatility,” he said. “If this period of volatility goes on for longer and we don’t get some stabilisation then we will see people cut costs.”
Ed Molyneux, of e-accounting platform FreeAgent, says the best thing the government can do to avoid such cuts is to keep firms ‘in the loop’ about how its talks with the EU progress, on issues such as tax and trade.
“Be as swift as possible in providing updates…and give every business owner in the UK clear, up-to-date information,” Molyneux said, appealing to the government. “The last thing the business sector needs is to be kept in the dark.”
However negotiations progress it is certain the UK faces a period of uncertainty, implementing changes to IR35 should perhaps be moved off the governments’ agenda whilst it focuses on the more pressing matter at hand of stabilising a shocked country.