North-east oil and gas workers face a 25% loss of earnings if new tax rules come into effect next year, an MP has warned.
Many workers will face higher bills as a result of the IR35 rule being extended to the private sector from April.
IR35, which was introduced in 2000, is an anti-tax avoidance rule that applies to all contractors and freelancers who do not fall under HM Revenue and Customs’ definition of being self-employed.
From April 6, every medium and large private sector business in the UK will become responsible for setting the tax status – or IR35 – of any contract worker they use – forcing thousands to pay income tax, as well as a higher rate of National Insurance.
West Aberdeenshire and Kincardine MP Andrew Bowie has called on Chancellor Sajid Javid to delay the change until a full review of its impact has been carried out.
In a letter to the Chancellor, seen by the Press and Journal, Mr Bowie said: “I understand HM Treasury’s desire to tackle tax avoidance, but it is important that, in going after those that are doing wrong, we don’t punish those who are simply making a living.
“We must ensure that any changes do not have an adverse impact on the workforce in the energy industry and others so vital to the economy of the north-east of Scotland.
“If the proposed changes – making every medium and large sector private business responsible for setting the tax status of any contractor they use – were to come into effect, I would worry for the industry and its ability to attract the highly skilled workers it needs.
“It is also predicted that changes could see a workers’ income reduced by up to 25-per-cent. Many of these workers are my constituents.”
He adds: “I would like you to set out when the review will begin and if, as a result of the review, the deadline for the changes to be made, currently April 6, 2020, might be extended.”
During the election campaign Mr Javid pledged to undertake a review, but there was no commitment to one in the Tory manifesto.
The Treasury were contacted for comment.