Originally written by Timothy Adler on Small Business
Freelancers say that IR35 changes to the way they are treated for tax are affecting their mental health and even prompting suicidal thoughts.
Over one third of contractors say that HMRC’s crackdown on how they are taxed, treating them as full-time employees rather than freelancers – known as IR35 – is either damaging their mental health or sending them to their GP for anxiety or suicidal thoughts.
Fifteen per cent of freelancers caught out by the IR35 rule changes are set to default on mortgages or are in the process of selling their homes, according to one survey.
>See also: More than four in 10 businesses could phase out contractors due to IR35
One anonymous freelancer said: “Frequently having chest pains and not sleeping. Added pressure of wife not coping well due to fear of losing family home. Trying to remain calm, but frequently having suicidal thoughts.”
Currently, contractors assess their own tax status, but impending reforms coming into force from April 6 will shift this responsibility to hiring businesses.
HM Revenue & Customs wants stop “disguised employment” gaming the system; working in a permanent position within a company without paying the same tax or employee contributions as full-time staff. As a result, both they and the hirer benefit from avoiding income tax and national insurance contributions.
HMRC estimates that only one in 10 people in the private sector who should be paying tax under the current rules are doing so correctly. The IR35 reforms are projected to bring in £3bn over the next four years.
Cancelled freelancers
In response, hiring companies have either banned freelancers or left them dangling. Nearly a quarter of freelancers have already been cancelled by employers, say accountants InniAccounts.
>See also: Freelancers call government 6-week review into IR35 ‘an insult’
And for those freelancers brought in by employers under the new IR35 rules, 90 per cent will experience a pay cut.
Given current uncertainty, most contractors and consultants (53 per cent) will simply walk away from clients within two months, leaving projects in disarray.
And this sudden void will have an immediate £2.2bn cost to the economy, estimates InniAccounts.
One respondent said: ““Very stressed, depressed and demoralised. I have worked hard to build a business and work with multiple clients at the same time, all of which have now cancelled my contracts. I have five kids and I wife who can’t work. I don’t know how I will survive after April.”
Another added, “Lost for words how incompetent the government has been in handling this aggressive stance by HMRC. Sleepless nights, running down savings.”
Commenting on the findings, Dave Chaplin, CEO and founder of Contractor Calculator and IR35 Shield, called for the government to abandon extending IR35 changes to the private sector.
Chaplin said: “This has created a political crisis for the Conservatives, the supposed party of business, who are set to decimate the valuable flexible workforce.
“The fact that over half of freelancers are going to abandon their existing clients speaks volumes. There is going to be an unofficial strike by a quarter of a million workers, and the impact on productivity for all firms that currently rely on them will be immense and the UK economy will suffer.”
Giving evidence to the House of Lords finance bill sub-committee on February 10, Institute of Chartered Accountants of Scotland head of taxation Justine Riccomini said that change was “just being railroaded” for the private sector, when the effect of IR35 on public sector contractors is still unclear.
Riccomini said that smaller and mid-sized businesses faced the most difficulty to comply with IR35 rules as they often do not have large HR, procurement or in-house tax departments.
InniAccounts surveyed 1,485 freelancers, contractors and consultants for its survey earlier this month.
Further reading on IR35
Over half of self-employed don’t even know what IR35 is
One third of freelancers say IR35 changes affecting their mental health
via https://ift.tt/2Jn9P8X by Timothy Adler, Khareem Sudlow
