With the Tories promising a review of the legislation if they're voted into power, and Labour sticking firmly to its guns on the matter, IR35 is likely to become a major issue when the public are next called to the polls, says staffing agency, GCS Computer Recruitment Services.
The Reading-based company believes disgruntled contractors are a "sizeable force to be reckoned with", and argues that with the potential voting support of family members and freelancers in other sectors, they may comprise a large enough percentage of the electorate to "swing a fairly tight balance".
"When the Labour government entered office, it promised to cut back on stealth taxes. Unfortunately for it however, IR35 is seen by those affected as an extremely stealthy tax," remarks Chris Bartlett, joint managing director of GCS.
The agency notes that end-user clients have been affected by IR35 as well, with many companies finding themselves paying higher fees for freelancers who have upped their rates in an effort to "soften the blow" of the increased taxation.
"Contractors are in a pretty much inelastic market - if clients need their skills they will dig deeper to pay the extra rates," explains Bartlett.
GCS says it is also concerned that the legislation has created "grey people" - contractors caught by IR35 who receive none of the benefits associated with permanent employment, and who no longer reap certain of the advantages (but still incur all the costs) associated with having one's own company.
Despite warnings to the contrary, Bartlett confirms that many contractors are still attempting to bypass the rules by focusing on the wording of their contracts, rather than the reality of their work situations. Labelling this a "waste of time", he says: "We won't know if the contracts fall inside or outside the legislation until they are submitted to the Inland Revenue. And while the Revenue has indicated its commitment to inspecting everyone's contracts within two years, even then any test cases won't reach the courts for another two years. This will be when precedents are set and when IR35 will finally crystallise."
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