One-two punch of Brexit, IR35 reform will floor UK plc, warns FCSA

A 12-month delay to April’s off-payroll rules is the only way UK contracting and UK plc can recover from an otherwise ‘one-two punch’ of Brexit, quickly followed up by IR35 reform.

Issuing this alert yesterday, Julia Kermode, CEO of the Freelancer and Contractor Services Association, said shelving the rules was the “only realistic way forward” for the enterprise community.

She was speaking to ContractorUK after the FCSA found that one in eight limited company contractors have plans to stop contracting when the off-payroll rules extend in April 2020.

'Double-blow'

But the “double-blow”, Ms Kermode said, is that at least four in 10 contractors say their PSC business will start struggling six months before the April start date, due to Brexit in October.

Seeming to show the lengths that affected PSC are prepared to go to, 13% are looking to work outside the UK due to Brexit, and 12% are looking at closing their company entirely.

“These findings should alert policy-makers that private sector IR35 reform must be shelved by at least 12 months, as the combo of reform with Brexit is too much for business to bear.

'Complex'

“UK plc will not be able to manage this complex rule change,” Ms Kermode adds, “just as scores of their skilled suppliers leave contracting and due to Brexit, even the country.”

According to the FCSA’s findings, 61% of self-employed people under 30, and 58% of people aged 31 to 40 think Brexit will result in fewer opportunities for their limited company.

Co-produced with FreeAgent, the findings indicate that it is also younger businesses – not just individuals – who are more likely to fear IR35 reform, as 67% of those planning to quit contracting set up less than five years ago.

“Time and again policy makers continue to ignore the fact that the self-employed have none of the employment rights or the security that comes with permanent employment,” reflected FreeAgent’s CEO Ed Molyneux.

“In addition to having to prepare for potential hardships that Brexit could place on the economy - and, in turn, their own businesses - they are also facing the additional challenge of proposed changes to off-payroll legislation.”

'More Morgan Stanleys'

Worse still, the dual challenge is already taking its toll. “Skilled people are leaving contracting right now due to Brexit and IR35 worries,” says Ms Kermode.

“This will have an impact on their business customers which means enterprise will be less able to weather economic uncertainty. And that means there will be more knee-jerk reactions from the likes of Morgan Stanley, making contracting an even more volatile profession.

She appealed :“Policy-makers must delay the commencement of IR35 changes in the private sector otherwise the very workers who traditionally prop up the economy in challenging times will simply not be there in sufficient numbers.”