This was an Autumn Statement confirming many public sector contractors’ worst fears – that the Government is to go-ahead and implement proposed changes to IR35 public sector rules by April 2017. The new Chancellor of the Exchequer’s first – and after announcing it is to be abolished – last Autumn Statement, will not be remembered fondly by many.
In short, by April 2017, the responsibility for determining and paying a contractor’s tax will lie with the public sector employer or recruitment agency, rather than the freelancer or contractor – an unpopular move that in many people’s opinion will cloud already murky waters around disguised employment, and lead to higher taxes for freelancers and contractors, who will continue to work without the same benefits and rights as employees.
A recent Contractor Calculator survey revealed that 80% of independent workers are happier off without any employee rights. And this recent move by Government - in many people's eyes - will put public sector freelancers' and contractors' independence under threat.
It is seen as the next step in the Government’s major crack-down on tax avoidance. Arguing the UK’s tax system needs to keep pace with the new economy and stating the Government will ‘consult in due course on any proposed changes’, Philip Hammond merely hinted at the proposed changes during his speech. Unsurprisingly though, the devil was in the detail, with the following official Autumn Statement Report revealing all.
IPSE, The Association of Independent Professionals and the Self-Employed came out of the blocks firing. CEO Chris Bryce, commented:
"The Government must now justify this decision. It has chosen to ignore the advice of the business and freelance community. We want to know why. It would be totally justified for contractors to walk away from the public sector.
"There was no recognition for the immense contribution the self-employed make to the economy. Having trumpeted the lowest employment rate for 11 years, ironically the Chancellor has launched an attack on the group largely responsible for this record.
"IPSE will continue to fight for the contracting community which has been badly let down by a self-described pro-business Government.”
The feeling of negativity was echoed by Ed Molyneux, CEO and co-founder of FreeAgent, a freelancer accounting software business. With “not much good news in the Autumn Statement for SMEs”, he called for a complete abolishment of IR35, with greater overall support for freelancers and small businesses from Government.
“I would have preferred to see more information about the government’s Making Tax Digital plans, greater powers for the small business commissioner to tackle late payments and less red tape for micro-businesses and contractors to deal with when it comes to their tax."
Speaking on behalf of employers and recruiters, who will now be affected by these changes, Samantha Hurley, Operations Director at APSCo, warned that the UK is in danger of moving from being one of the most flexible labour markets in the world, to possibly the most inflexible.
“The Chancellor has just promised large scale investment in infrastructure and science and digital innovation to the tune of £23bn over the next five years. However we would question how the public sector will deliver on this promise when HMRC has just destabilised the flexible labour market in the UK, which Government Departments, not to mention local and regional Government rely on.”
On top of this, the 5% tax-free allowance "will be removed for those working the public sector, reflecting the fact that workers no longer bear the administrative burden of deciding whether the rules apply".
Even cutting Corporation Tax from 20% to 17%, the increase of Personal Allowance from £11,500 to £12,500 and the promise of a £1bn investment in the UK’s digital infrastructure wasn’t enough to balance out what will no doubt be remembered as a worrying, last Autumn Statement.
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