Freelancers rue Gordon Brownís tax blunder on tenth anniversary

PCG, which represents the UKís freelancers, has condemned the Governmentís failure to abolish IR35 ahead of the measureís tenth anniversary on Monday.

ìPCG was formed by passionate and far-sighted freelancers who instantly recognised the harm that Gordon Brownís IR35 proposal would inflict,î commented PCGís chairman Chris Bryce. ìTen years on, they have sadly been proved right, and the unfairness of this measure remains evident. In these times of economic difficulty, the Government should be doing everything it can to remove barriers to enterprise – this must include the abolition of IR35.î

IR35 remains damaging to the UK economy:

- UK freelancers face a perpetual threat of a costly and distressing HMRC investigation under IR35

- Expert advice is needed to navigate IR35 successfully: thanks to the advice offered by PCG, freelancers who are not PCG members are more than twice as likely to owe money under IR35 than those who are – many taxpayers undoubtedly pay tax unnecessarily under IR35

- IR35 obliges freelancers to spend time and money assessing their status as best they can, with contract reviews, tax investigation insurances and negotiations with clients and agencies – all of this effort would be better spent generating wealth for the UK economy

- The Government has acknowledged that it is unable to implement IR35 fully.

Over the last ten years, PCG has continuously offered constructive solutions to the Government on behalf of its members. IR35 should be immediately repealed and employment status clarified, ideally by setting it out clearly in legislation. So called ìdisguised employmentî is a problem, but it needs to be addressed by employment law, not tax law, and in a way that recognises that freelancers are in business on their own account, and therefore not disguised employees.

There is no evidence that IR35 is raising any money for the Exchequer: ministers have stated that they cannot distinguish between IR35 and other PAYE compliance work by HMRC. It is known that IR35 investigations are often baseless, however: 1,462 of the 1,468 cases known to PCG have resulted in no extra tax being owed. HMRC keeps no tally of how much these fruitless investigations cost, nor is it known how many taxpayers pay up under IR35 wrongly, believing themselves to be caught when in fact they are not.

ìIR35 remains one of Gordon Brownís most ill conceived tax laws,î concluded John Brazier, managing director of PCG. ìPCG calls on him once again to admit his mistake and without delay to repeal it; we also call for the other political parties to commit firmly to its abolition. Its continued presence on the statute book is an affront to the UKís 1.4 million freelancers who provide an invaluable flexibility and dynamism to the economy.î