The Chancellors announcements give little hope for contractors

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The Chancellors announcements on the 16th of March gave little hope for contractors:

The scrapping of Class 2 NICS for the self-employed is about the only thing contractors can look forward to in the government’s Budget and with a renewed commitment to clamp down on Personal Limited Companies in the public sector; Liquid Friday and the FCSA believes that this group of workers is being unfairly penalised whilst trying to help grow the UK’s much needed flexible workforce.

Julia Kermode, CEO of The Freelancer & Contractor Services Association said: “Whilst the Chancellor spoke clearly about his mission to back small businesses he is determined to penalise freelancers and contractors by clamping down on Personal Service Companies, assuming that those working in this way are tax evaders and avoiders.  By definition, freelancers and contractors are not employees, but are procured to provide services to a company and are not part of an organisation’s payroll.

“The budget proposes that, from April 2017, the public sector body engaging an off-payroll worker, or the recruiting agency, will be responsible for ensuring that the worker is paying the correct tax.  The change essentially moves responsibility for tax from the individual to the hirer/agency, however determining IR35 status is complex and the proposal will further increase the regulatory burden on agencies and public sector bodies.

“HMRC say they will introduce clear, objective tests for employers to decide at the outset whether they need to consider the new rules and identify those engagements that are clearly caught by the rules.  FCSA will play an active role in the forthcoming consultation to ensure that the tests are going to work in practice.

“We are not surprised that there has been no last-minute changes to planned T&S reform that will be effective from April this year.  There is no question that we will see a skills shortage as fewer workers will be willing to travel for assignments.  There will undoubtedly be a knock on effect and Government policies that are heavily reliant on contractors will be hit –  the new plans for HS3, Crossrail, M62 widening, 18-mile trans-Pennine tunnel will suffer along with other current infrastructure projects which rely on contractors.

“We must redress the balance and change the perception that all temporary workers are avoiding paying tax. Many organisations rely on contractors for support as they enable businesses to be agile and scale up or down according to demand.  Individuals working for themselves are in a very different position to an employee – they have no job security or benefits, and are taking significant risk in choosing to work this way.  The Chancellor needs to recognise the important role that they are playing in helping to ‘build the strongest economy in the world’ that he claims to be so proud of.”

Joe Taffurelli, Operations Manager of Liquid Friday says “The governments renewed attack on contractors and the UK’s flexible workforce could mean the decline of temporary assignments and the overall slowdown of UK Plc which would have long lasting, unknown, effects on the British Economies recovery”

The ever changing legislation focusing on contractors and the UK’s temporary work force is already having a real impact on Umbrella workers across the UK who will soon see a real difference in their pay packets from April.

If you would like to talk to us about the changes, please contact us.