Could IR35 extend to the private sector?
With the Autumn Budget approaching on Wednesday 22 November, the financial secretary to the Treasury, Mel Stride, has hinted to the Financial Times, that IR35 rules governing how freelancers and contractors are taxed could soon be extended to cover the private sector.
How have IR35 changes affected the public sector?
It was only in April of this year that the reformed IR35 rules came into effect. Since the new changes 90,000 additional contractors were taxed as employees in the first three months.
This resulted in the public sector seeing fewer contractors offer their skills and expertise through service companies. According to a recent poll, 45% of recruiters are seeing an indication of contractors increasing their rates under IR35.
Furthermore, HMRC stated that 90% of contractors had been paying less tax than they owe, after wrongly classifying themselves outside of the tax regulations.
Will an extension of IR35 regulations affect the private sector?
The adjustments introduced in April do not currently apply to the private sector, which some public sector employers believe is unfair. Therefore, they believe by extending IR35 into the private sector it would remove inequality between both sectors.
Despite this, The Association of Professional Staffing Companies (APSCo) reflects that an extension into the private sector will have a negative impact on the dynamics of the labour market for flexible workers.
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