Tax & admin · 25 May 2017

Freelancer election manifesto looks to strip HMRC of policy making powers

IR35 advice
The policy proposals would see a new tier in the tax system introduced for freelancers

A freelancer election manifesto from the UK’s largest independent professionals organisation has demanded a reformed taxation system for sole traders, taking away HMRC’s legislative powers and creating a bespoke freelance tax model.

In its “A Contract with the Self-Employed” document, the Association of Independent Professionals and the Self-Employed (IPSE) announced proposals that would see HMRC strictly focused on enforcement, revenue collection and support.

IPSE stated HMRC’s role in developing taxation policy was “inappropriate”, and should be controlled strictly by the Treasury.

Detailing further proposals, the organisation outlined a new tier in the tax system – Freelancer Limited Company (FLC) – that would clarify the tax and employment status of independent professionals and protect government revenue.

The organisation also called for the incoming government to commit to the current rate of Class 4 National Insurance Contributions (NICs). IPSE stated the favourable rate was recognition of the risks of self-employment, and considered the absence of workplace security.

Under IPSE’s plans, a further delay to Making Tax Digital would see the initiative pushed back to at least 2025. Small firms under the VAT threshold would be initially exempt, while quarterly tax returns would be scrapped for annual submissions.

Commenting on the freelancer election manifesto, Chris Bryce, IPSE chief executive, said Britain’s current tax system reflected the traditional employer/employee model and was unfavourable to the self-employed workforce.

“As self-employment booms, the government needs to supplement this 21st century way of working with a fairer, more efficient, 21st century tax system,” he said in a statement.

Recent IR35 reforms put a further administrative burden onto public sector contractors and agencies, and IPSE advised incoming minsters to adopt a “damage control” approach and protect public sector projects from being abandoned.

Bryce championed the success of IPSE’s previous freelancer election manifestos in influencing government policy.

The organisation set out the first proposals for the incoming small business commissioner, and applied significant pressure that contributed to scrapping chancellor Philip Hammond’s NIC rises for sole traders.

In the document, IPSE chairman James Collings declared the government’s recent approach to self-employment a “complete disaster”, citing IR35 reforms and NIC u-turns as proof that new policy should follow consultation with Britain’s community of freelancers and sole traders.

Outside of significant tax reforms, IPSE confirmed its support for the Taylor Review into modern employment practices.

The incoming government will use Matthew Taylor’s assessment of new self-employment models to protect the flexible working while holding gig economy firms to account.

Bryce explained the freelancer election manifesto would push ministers to find solutions to other problems facing the self-employed.

“IPSE also wants to see improved pension provisions, fairer parental benefits and improved access to the Lifetime ISA. We want to see more tax-deductible training for new skills and further integration of self-employment and enterprise education in curriculums,” he added.

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ABOUT THE EXPERT

Simon Caldwell is a reporter for Business Advice. He has a BA in politics and communications from the University of Liverpool, and previously worked as a content editor in the ecommerce industry.

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