Although the details might change, there is general agreement that something will be forthcoming to change or clarify the contractor landscape.
Top of the list is the definition of ’office holders’, which has been on the Government’s agenda since the scandal erupted over senior public servants being paid through limited companies to avoid tax and NICs.
After several false starts, the Government is determined to wipe out this practice, but there has been fears that sledgehammers and nuts might be used in an attemt to put its own house in order.
Martin Hesketh, managing director of freelancer accountants, Brookson, gives his predictions on these issues and other decisions he thinks the Chancellor will make in the Budget and how this will affect the flexible workforce.
Wider UK economic outlook
We think that the Chancellor will not move away from his austerity strategy and the Government is likely to remain focussed on reducing public spending and national debt. There is, of course, the second objective of attempting to stimulate growth and this would require funding for either further spending or small tax cuts – although this is likely to be a few ’carrots’ rather than a significant amount.
These carrots will probably be in the form of increases in personal allowances and tweaks around Inheritance Tax thresholds or rates and around Capital Gains tax. If implemented they will be aimed at middle income families who have arguably felt the pinch more than others of late.
Contractors and the self-employed
As per previous Budgets we expect further activity around IR35 to be buried in the fine print rather than included in the speech. The definition of ‘office holders’ continues to generate comment and further clarification around this should feature, especially as HMRC has stated that fresh guidance is imminent on IR35.
I would welcome further guidance from the Chancellor on the ‘required assurance’ policy, implemented via a Cabinet Office policy note late in 2012. These obligations are unclear and both public sector organisations, recruitment agencies and workers are very concerned about how these will be interpreted by HMRC in their enforcement activity, which is due very shortly we understand. Currently, there is significant variation in how individual public sector organisations are implementing this policy.
I believe that the Chancellor could also look to address some current abuses in the industry in order to protect tax revenues and prevent the abuse of low paid workers. The first issue is to end the loophole around Offshore Employment Intermediaries. This would be a positive move to improve standards and any Offshore Employment Intermediaries recruitment agency or contractor who may be engaged with such an intermediary should seek advice on how to mitigate their risk. It is recommended that recruitment agencies also review preferred supplier lists to ensure there are no offshore intermediaries introducing risk to the supply chain.
The second issue is around the exploitation of low paid temporary workers by client businesses, recruitment agencies and umbrella businesses using salary sacrifice schemes and abuse of travel and subsistence payments and national minimum wage. The legislation is in place to effectively police these but current enforcement approaches are not working. These low end practices are giving the whole industry a bad name and Brookson believes that enforcement action needs to be taken urgently.
Finally, I would suggest that our industry needs to pay attention to Lord Hesseltine’s regional growth plan, as this is likely to be referenced on Wednesday and could see opportunities for skilled contractors in sectors such as aerospace and automotive, through a funding boost for Local Enterprise Partnerships. I’ll be reading the detail around this with interest and advising Brookson customers accordingly, but it’s certainly something to watch out for on Wednesday.
Full coverage and expert analysis on the Budget issues affecting contractors will be available in the Political News section of Shout99. The Budget will take place on Wednesday March 20.
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Susie Hughes © Shout99 2013