The roll-out of the off-payroll Tax will cause huge damage to the UK labour market, some of which has already been realised. The #StoptheOffPayrollTax campaign’s primary aim is to prevent these changes happening, but there are numerous possible outcomes that would hugely benefit all concerned.
The IR35 legislation, introduced in 1999, is widely regarded as being flawed – and the current Chancellor was critical of it in the past, yet now is pushing ahead with the damaging Off-Payroll Tax in the private sector!
As well as scrapping the plans for the roll-out, it is high time that the whole legislation, which has caused so many problems, to be overhauled and a better and fairer way of taxing contractors and contracting.
The new rules state that the hirer is responsible for paying the employer’s NI. Whilst this is what the legislation says, the reality is that all contractors are being forced, legally or otherwise, to pick up this extra cost out of their pay, and no extra tax is actually paid by the client.
Instead, it has caused massive tax avoidance. The entire tax bill, including the employer’s NI, is in many cases unlawfully being paid out of the gross rate paid to the contractor. This enables corporations to dodge their tax liabilities, and is not what it was designed to achieve. Plus people have been pushed into tax avoidance schemes as the only way to avoid be wrongly classified as a ‘deemed employee’ with no employee benefits.