GET IN TOUCH

Talk to us

Send us a message, call using the numbers below or use our live chat.


Enquiries

01202 901952

Existing customers & HMRC

01202 901951
Live Chat
today's Budget

Autumn Budget: Real Contractors get a green light to increase productivity from a Budget made to measure?

Has Chancellor Hammond helped or hurt the flexible workers in the UK?

 

Did he try and make a silk purse from a sow’s ear or did he merely pull the tail of the Contracting tiger?

 

Genuine freelancers and contractors should be delighted with the Autumn Budget. There is more good news than bad. Enjoy the nil or lower rates of Stamp duty if you are a first time buyer up to £500,000, enjoy the many ‘new gigs’ created by the Brexit alternative outcomes fund, huge investment in 5G, R&D and Artificial Intelligence technologies and take the lower dividend allowances in your stride.

 

Also, great news on a change to reduce a burden on employers from April 2019. PSCs will be able to claim Subsistence Benchmark scale rates without receipts and without the need for an Independent review. Further guidance on Travel and Subsistence to follow. (Merry Christmas!)

 

With productivity being downgraded by up to 25% in the coming years, economic growth is in need of a stimulant. The Chancellor has indeed tried to make a silk purse from the sow’s ear he inherited from the Labour party (as he reminded Corbyn more than once during his speech) and through extensive investment in digital technologies, created a blueprint for the “silk purse” of the future.

 

In a bold spending and investment plan and still attacking the deficit as well as sticking to manifesto promises, it looked likely that he would have to pull the tail of the contractor tiger by introducing IR35 into the Private sector. But NO. It seems the tails which have been pulled are those of the Global businesses not paying income tax on royalties earned in the UK and online traders avoiding VAT.

 

Mr Hammond makes it clear in the “Red Book” (detailed Budget statements) that he intends to be patient and properly consider the outcomes from extending IR35 in the Public Sector before making similar changes into the Private Sector. A safe, sensible and politically expedient course of action.

 

This is a wise decision as it is too soon to know if the true Public Sector lessons have been fully learned. There are of course many who will react negatively to this announcement, including those who complain about the ‘unfairness’ of Private Sector IR35 reforms, those who think themselves permanent victims of HMRC, and those who resist change.

 

The fly in the contractor ointment is the productivity forecast being downgraded by almost 25% over the next few years which will affect all sectors of the UK economy, including the small business “backbone” as Hammond referred to it.

 

On behalf of Independent workers and Knowledge workers : “Spreadsheet Phil” you look like you kept your job and I look like I will keep mine for the time being. But proceed with caution – It’ll take a clever balancing act to get this right, Mr Hammond!

 

In a Budget he headlined as offering a ‘balanced approach’ to creating a ‘dynamic economy’, we ask you to tread carefully, Mr Hammond, and recognise that Public and Private Sector workers cannot be bundled together and to label them as having the same needs, aspirations and objectives would be not only naive, but potentially dangerous for the economic future of this country.

 

The reality is more complex and does need careful consideration; our flexible workforce represent a collection of individual taxpayers and British citizens with different skills and vulnerabilities. Some need protecting and others need releasing to deliver their potential.

 

There are many knowledge workers in the UK who are truly independent from their engagers, and they work this way as a lifestyle choice. If they trade through their own Personal Service Company they do so for many reasons. One of these is to legally and legitimately mitigate tax, but this is not the only driver. It is not the role of Mr Hammond and HMRC or the Treasury to eliminate flexibility in order to try and raid the War Chest of the contracting sector.

 

So, by all means, we should learn from the Public Sector, but please don’t assume that Private Sector will react in same way; provoking the truly self-employed private workforce (even where they choose to operate through a one person Limited Company), will certainly create a reaction:

 

  • Advisers will assist in demonstrating to engagers that they do not have  powers or rights of: Supervision, Direction or Control
  • Other intermediaries will appear to share the risk of tax loss
  • Blanket assumptions will not exist or be tolerated
  • Compliance and administration will hit HMRC as well as the supply chain

 

So it’s right that rather than just starting a fight with UK flexible workers by pulling the tail of the independent knowledge workers who bring huge tax revenues and increasing productivity and prosperity to UK plc, that Hammond is taking a moment to reflect.

 

Here at Intouch Accounting we provide Limited Company contractors with everything they need to run their company smoothly, from a tax and accounting point of view. Our award-winning services are forefronted by our team of expert Personal Acccountants, who are on call to answer your unlimited questions whenever you need them. If this sounds like the level of service and expertise you need from your accountant, get in touch by calling us on 01202 375 562 or email us / send us a live chat.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.