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In general, there was some disappointment that the Chancellor had not clarified the position with regard to 'office holders', then followed by a relief that maybe no news was good news, but tempered with a concern about what might be around the corner as there was a clear indication that something would be.
On corporation tax, it did not go up, but equally it did not go down, as it did for the larger companies.
No surprises on the continued attack on tax evasion and 'aggressive' tax avoidance. Although there might be intakes of breath among providers of some schemes used by contractors as the Government has made it clear it is going to tackle the supply side as well as the demand. But generally, there was a feeling that some of these schemes have been sailing close to the (offshore) wind and it was only a matter of time before HMRC took a long hard look at various loopholes.
Here is a round up of the reactions of the various interests in the freelancing sector:
Business as usual
Martin Hesketh, managing director of specialist freelancer accountants, Brookson, saw no surprises and again adopted a balanced approach. There was a welcome for the moves to stop tax avoidance loopholes, but a plea to ensure this legislation is targeted correctly. In summary they thought it was, for the time being, business as usual for the flexible workforce.
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On specifics, Martin said: "The relevant section of the Budget document says the issue of ‘office holders’ and IR35 will be clarified with the upcoming Finance Bill, so we must continue to wait for the detail. We also note in the small print that the Government will remove the presumption of self-employment for limited liability partnership partners (LLPs), in order to uncover the disguising of employment relationships through LLPs. On both these issues we would urge the Government to ensure legislation doesn’t have an adverse effect on other freelancers and contractors, and avoid the furore around last year’s controlling persons announcement.
"Likewise, the Chancellor repeated his autumn statement pledge to tackle tax avoidance through the use of Offshore Employment Intermediaries. In preparation for this I would advise recruitment agencies and contractors to review their practices and preferred suppliers, to ensure they are not engaged with an Offshore Employment Intermediary and mitigate the risk through the supply chain.
"This is about high professional standards and I was disappointed that the Government didn’t take the opportunity today to address low end working practices from certain client businesses, recruitment agencies and umbrella businesses who use salary sacrifice schemes and abuse of travel and subsistence payments and national minimum wage. Such abuses damage the flexible labour market and while the legislation is in place to effectively police this, Brookson believes further effective enforcement action is needed in order to further protect the reputation of the industry.
"While we await the Government’s next steps on these matters I would call on the flexible workforce to take heart from the Chancellor’s comments on aspiration around sectors such as aerospace, creative, energy and transport.
"These sectors have a high percentage of freelancers and contractors who are ready to offer UK plc a competitive advantage through their modern, flexible and highly skilled practices, so increased investment in them is to be welcomed.
"In years past I have claimed the Chancellor has disappointed the workforce by announcing changes which shows he doesn’t understand them. This Budget wasn’t more of the same but the Finance Bill will reveal how much the Government has been prepared to learn."
Lacked impact
Derek Kelly, Managing Director of Optionis group, which includes Parasol, ClearSky Accounting, ClearSky HR, and Silverline, saw it as a bit of a ’jam tomorrow’ Budget with the 12 months delay before the some measures come into effect, with little short term cheer.
He said: “2013’s Budget lacked the impact of last year’s radical announcement, although it did contain some positive points concerning corporation tax, childcare provision and NIC relief. Government assistance with all of these issues will no doubt be welcomed by SME owners and contractors alike, but the major problem with this announcement was the timing. Almost all the benefits earmarked for business will take place in the future, while plans for today, tomorrow or even this year were conspicuous by their absence.
“The introduction of the Employment Allowance, which will take £2,000 off every company’s National Insurance bill from April next year, will be beneficial for SMEs. For 450,000 small businesses this will effectively mean paying no jobs tax at all, removing barriers to employment for start-up companies and one man bands who have up until now been deterred from hiring staff by prohibitive costs.
“Other good news for businesses included the introduction of more generous shareholder status, Capital Gains Tax relief on sales of business to workers, and an increase of 100 per cent on tax free loans for items such as commuters’ season tickets. There will also be a reduction in stamp duty on shares in growth markets such as AIM. Again, the intention is there and all of these measures will be beneficial to SMEs, when they eventually take effect.
“The Chancellor also focused on tax avoidance and evasion measures, which are aimed at recouping £3bn in unpaid taxes. While tax evasion needs to be dealt with, it must be remembered that tax planning is a legitimate activity. Some of the knee-jerk proposals to deal with tax evasion could have a negative impact on contractors – the key issue here is to ensure that the correct amount of tax is paid, not the highest amount. Legislation to combat offshore tax evasion already exists and should be utilised properly before additional, complicated laws are introduced.
“The UK’s transport infrastructure system received another major boost, with £3bn being earmarked for new projects to improve the country’s ‘economic arteries’ each year from 2015-2020. This is positive news for workers in the transport sector, with the promise of new jobs and opportunities. Improved transport systems will benefit flexible workers and enable contractors to spend more time working and less time on the road. The shale gas industry will also receive investment, which is good news for contractors and staffing businesses in this sector.
“Fortunately the Chancellor did not announce any temporary cuts in VAT. While a reduction in VAT would have grabbed headlines, it would also have created havoc in businesses, negatively impacting on processes and systems.
“While many elements of the 2013 Budget are good in theory, the problem is that they are conditional and belong in the future. What we really need are immediate measures, such as the scrapping of September’s fuel tax, which will benefit companies’ bottom line straight away. While the Treasury has labelled this the ‘aspiration nation’ Budget, the danger is that in reality its lack of detail could mean that it will run out of steam long before it inspires people to invest.”
Little surprise
Stuart Davis, Chairman of the Freelancer and Contractor Services Association, also took a balanced approach. On the one hand pleased there was nothing negative, on the other, disappointed there was nothing positive.
He said: "This Budget held little surprises for our members and the flexible workforce more broadly. Encouragingly, the Chancellor abandoned any former notion to impose further Red Tape on the flexible workforce, meaning the FCSA’s message has clearly been heard in our recent meetings with the Treasury.
"However, the Chancellor didn’t cut any Red Tape either, demonstrating that we still have a long way to go to communicate to Government the true value of the flexible workforce and the even greater contribution they could make to economic growth, given the right conditions.”
Keep NICs simple
One of the successes fo the Budget in terms of a welcome announcement was the Chancellor's claim to remove small firms from National Insurance bills of up to £2,000 through the new NICs Employment Allowance.
However, while the Chartered Institute of Taxation (CIOT) welcomed the announcement it stressed the need for this to be done in a simple way.
Patrick Stevens, President of the CIOT, said: “The Chancellor presented this as a simple way to help small employers and a simple reduction in their tax bills will be welcomed. But the trick is to make sure it is simple not only in concept but also in execution.
“There are mechanics to sort out such as whether a small business withholds up to £2,000 of NICs or has to pay first and reclaim later. We will be doing our best in discussions with HMRC to make sure this new scheme really helps employers and doesn’t tangle them in more Red Tape.”
More information
Shout99 will be continuing its focused coverage with analysis from experts of the issues in the Budget (and the more important ones behind the Chancellor's words) in our Political News.
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Susie Hughes © Shout99 2013
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