UK Businesses face higher costs and skills shortages if new off-payroll tax hits the private sector.
A study of more than 2,000 public and private sector contractors by ContractorCalculator has revealed how Off-Payroll tax in the private sector will affect the employment market.
The key conclusions show:
- 94% of contractors would avoid contracts placing them ‘inside IR35’ and 25% would never take a contract ‘inside IR35’
- 73% would only accept ‘inside IR35’ contracts with a significant rate rise
- 63% said they would demand a rate increase if travel was required
- 54% would work less each year rather than take on ‘inside IR35’ work
- 23% will quit contracting altogether
- 94% believe those deemed ‘employed for tax purposes’ should automatically receive employment rights. 89% would consider legal action to secure rights
- 79% do not consider HMRC’s CEST tool to be accurate.
- 48% will not vote for an MP who supports these tax reforms
Remarking on the discoveries, Dave Chaplin, CEO and founder of ContractorCalculator said: “We’re fifteen months in since the Off-Payroll legislation hit our public services and organisations across the public sector have failed to compromise on their approach to the tax legislation and are suffering intensified skills shortages as a result. If private sector firms follow suit, they could suffer an identical fate.
“As our survey shows, an expansion of the new tax into the private sector alone threatens to deprive the UK labour market of much of its flexibility and it will cost them, both in monetary terms as well as in talent and skills terms with 94 per cent of contractors avoiding ‘inside IR35’ work,” he continues. “Our findings paint a bleak picture of things to come if government chooses to roll out the new off-payroll tax to the private sector. It will be devastating for UK plc and the UK economy overall.”
Chaplin added: “The Off-Payroll tax rules may not require firms to grant rights to contingent workers. However, contractors are willing to take measures to secure employment rights if deemed to be ‘employed for tax purposes’, resulting in potentially costly legal implications for hirers and again more damaging impact for UK plc as 48% claimed they would lodge an employment tribunal appeal to secure employment rights.”
Chaplin concluded: “As the implementation of the recent public-sector changes have shown, Government alone can’t be trusted to do what’s best for the UK and the UK economy. We are living and working in uncertain times and the labour market as a whole must make Government see sense before any more damage is done. Business should speak up and speak out now.”
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