
The Treasury offers 12 months of leniency
However, the Treasury is trying to soften the blow by allowing for a 12 month period where businesses will be let off from any mistakes they make with their returns, allowing them to finesse their compliance procedures for the long-term. Chancellor Rishi Sunak has confirmed that businesses will not be penalised for compliance errors for the next 12 months, although fines will be imposed on “deliberate non-compliance” during this time. Unsurprisingly, the new measures have been met with opposition from both contractors and the businesses that employ them. Contractors believe it could decrease their earning power by 25%, while businesses complain that enforcing the new rules could cost them millions. ?For such a complicated piece of legislation, the HMRC?s confirmation of a ?light touch? approach to IR35 is a welcome sight. Most businesses have been working tirelessly to prepare for the change and it is only right that they are not held ransom for genuine mistakes that are made in the assessment process.” ? Victoria Roythorne, Head of Compliance & Operations, Outsource UK. Contractors are also concerned about the survival of the freelance industry as a whole; where bringing in contractors as official full-time employees might destroy their flexible work culture for good.Penalties measured by compliance
The extent of the fines HMRC could impose on businesses breaching the new rules is not yet known, although its website suggests that penalties will be determined by the extent of intended compliance: According to its website, the Government says it could impose a ‘100% of the tax-owed’ fine if evidence of deliberate non-compliance is found. This could reduce to 0% if the business in question has taken “reasonable care” to be compliant.Major companies wave goodbye to freelancers
While it’s understandable that freelancers are worried about their livelihood and their wages under these new measures, is there evidence that IR35 reforms could put businesses off hiring them altogether? According to a poll by accountancy firm Inniaccounts, maybe: The research, that took in 350 organisations revealed that 70% of the UK’s major companies, including Deloitte, HSBC and Santander would avoid using freelancers following the new measures. Will the sentiments be the same for medium-sized SMEs who also hire contractors? Potentially, as their smaller budgets and tighter cashflows will mean any fines imposed on them by HMRC will be felt all the more. ?Many businesses are already scrapping their contractor workforce because of these changes and, as we told the House of Lords inquiry, our research shows at least a third of freelancers plan to stop contracting in the UK because of them.? ?? Andy Chamberlain, Deputy Director of Policy at IPSE (the Association of Independent Professionals and the Self-Employed).Sign up to our newsletter to get the latest from Business Advice.