Failure to consider viable alternatives to IR35 is a missed opportunity to stabilise fragile economy

According to HMRC calculations, the present cost of non-compliance on IR35 in the private sector is around £700m and is forecast to increase to £1.2bn by 2022-23. With pressure to raise taxes following the Prime Minister's pledge of £20bn worth of extra spending on the NHS by 2023, the government needs to raise extra revenue from somewhere. But are there any viable alternatives to the increasingly disruptive changes to IR35 legislation?

Several years ago the Association of Independent Professionals and the Self Employed (IPSE) and Ernst & Young suggested the creation of a new limited company designation. This would be specifically targeted at freelancers, offering them limited liability status, simpler tax treatment and a minimum salary guarantee. Despite winning widespread support from tax experts, the idea is dismissed by HMRC in their consultation document as “introducing a new tax regime instead of encouraging compliance with the current one.”

Such comments have been used to suggest HMRC’s bias towards introducing off-payroll rules to the private sector that mirror those implemented in the public sector earlier this year. However, the changes in the public sector have only worsened matters for overstretched public sector services such as the NHS, by adding staff shortages to a chronic lack of funds. With Brexit continuing to stifle investment and rising inflation, the government can ill afford more negative impact on an already fragile UK economy.