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Worries about possible contractor rule change in Budget
by Susie Hughes at 07:46 16/03/16 (Political News)
The freelancer community was showing its concerns that today's Budget (March 16) could hold yet more measures which will impact adversely on the flexible workforce.
Press reports suggested that the Chancellor, George Osborne, would launch a 'crack-down' on the people who use the so-called 'personal service companies to avoid paying income tax'.

This practice received high media interest several years ago when Ed Lester, then Head of the Students Loans Company, was found to be operating in this manner. Subsequently, many public sector bodies and associated organisations such as the BBC, were found to be remunerating some of their senior workers in this way.

The Government tried to put its own house in order with a knee-jerk crack-down on this within its own Departments. Now it appears as if there might be more plans in the pipeline for further action.

A recent article on Sky claims that the Chancellor will target tax loophole in the Budget. It says that the Chancellor believes up to 20,000 public sector workers 'using PSCs are avoiding an average of £3,500 every year when they should be paying the same tax as a staff member doing a similar job'. It beleives that closing the 'loophole' could result in an extra £70m for the Treasury.

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There was speculation that changes could lead to the end client having to take responsibility for determining the contractor's employment status.

The latest reports come via rumours of a 'leak' but this could equally be a 'kite flying' exercise, designed to test the water before a firm announcement, or unfounded speculation.

'Old chestnut'
Agency group, APSCo said that the proposals are 'nothing short of lunacy'

Samantha Hurley, Head of External Relations at APSCo said: "I cannot believe we have this old chestnut rearing its head yet again. According to ‘government sources’ the idea is to create a more level playing field between direct employees and those who work through a PSC as it believes that to tax people differently when doing the same job is unfair.

“But let’s put this into context. The continual pressure on PSC income (let’s not forget the changes in the taxation of dividends) has to be seen against the backdrop of the increased risk they take on as contractors. While no-one would argue that there may be a tax benefit to operating as a PSC, there are none of the benefits afforded to those who are directly employed - holiday pay, sick pay, redundancy payments and all the costs and risks associated with running their own business. Let’s not also forget that contractors only get paid when they work – and have no guarantee of continuity of work. Using the sensational (and relatively uncommon) example of television presenters and sports stars is political posturing at its worst.

“This is the second time in less than four months that a Government source has leaked information about proposed action to be taken against PSCs. Last time it came to nothing, but here we are again. Rather than responding to fluctuations in the economy with knee-jerk reactions such as this, perhaps the Government would do better to listen to the outcome of the many consultations and reviews on this subject, and put together a coherent, long-term strategy for the taxation and support of the micro-businesses and the self-employed.

“The reports suggested that engagers will take on more of a role in deciding how workers should be taxed – in other words deciding whether a worker sits inside or outside IR35, this could pose a huge commercial risk to both recruitment firms and end user clients and risk completely destabilising the professional flexible labour market.

“This whole issue represents a serious threat to the professional flexible recruitment sector. That flexibility is one of the key factors that allowed this country to come out of recession quicker than many of its EU counterparts and so to even consider damaging UK PLC’s ability to compete in a global market would be nothing short of lunacy.”

Short-sighted
Freelancer and self-employment group IPSE, has branded the rumoured changes as 'short sighted'and said that making the public sector client decide the employment status of freelance workers will lead to confusion among workers and added costs for the taxpayer.

IPSE Chief Executive Chris Bryce said: “Independent professionals in the public sector are not employees, and attempting to change their employment status will lead to confusion for the workers and added cost to the taxpayer. Once you label a freelance business owner an employee, he or she will expect holiday pay, sick leave and other employee benefits which will have to be paid for by the taxpayer.

“People who run their business through personal service companies may also decide they no longer want to take public sector contracts, and this means government departments will miss out on freelancers’ expertise – hitting the public sector’s ability to deliver vital projects, such as HS2 and Crossrail, in a timely and cost-effective way. This move is entirely against the Government’s declarations that it supports entrepreneurs and is working to reduce red tape. The Chancellor should reconsider making this announcement.”

Budget information
Shout99 will be reporting on all issues relevant to freelancers and small businesses in the Political News section of Shout99.

Alerts also available through our Twitter feed.

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Susie Hughes © Shout99 2016

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Worries about possible contrac... Susie Hughes - 16/03
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