The Association of Independent Professionals and the Self-Employed (IPSE) has warned that tens of thousands of personal service companies (PSCs) could be forced to end trading if the proposal to ban tax relief for the supervised, directed or controlled comes into force, Contractor UK reports.
According to the contractor body, as many as 45,000 PSCs will be sunk if tax deductions on travel and subsistence (T&S) expenses are taken away in April 2016.
This figure is just one that the IPSE has highlighted to raise awareness of the potential damage that the ban would cause. A recent poll of IPSE members revealed that as well as one in five expecting the ban to pull the plug on their business, more than three quarters (76%) are concerned that it will prevent them from being able to accept contracts far from home, due to financial limitations.
This means that businesses operating via limited companies will be at "a clear disadvantage" to larger firms who will continue to receive tax relief.
"We've been flooded with emails from freelancers worried they'll have to fold their business because of these changes," the IPSE added, calling on the government to rethink "this harmful proposal."
The association also warned that the ban would push prices up for companies hiring contract workers, as the large majority (85%) of respondents said they would have to charge more after April next year to make up their losses.
It stated, "Rising prices will discourage businesses from using freelancers, removing crucial flexibility and expertise from the UK's economy."
With mobility being "key to creating a thriving freelance economy", the IPSE fears that people working for themselves "will suddenly find themselves unable to take on jobs that aren't near their home."
"Ultimately if businesses are closing, it will have the opposite effect of reducing HMRC's revenue, creating a lose-lose situation," it concluded.