By Ben Pindar, PR
National accountancy firm Danbro has criticised Chancellor Philip Hammond’s claim that he is building “an economy that works for everyone” in his Autumn Statement, arguing the Government doesn’t understand the modern way of working in Britain and he has left millions out of pocket.
By forging ahead with major reforms to the way public sector contractors are paid and launching a major cash grab on the self-employed, Danbro says the Chancellor has again punished the UK’s five million contractors and small businesses, potentially weakening our prospects ahead of Brexit.
However, Danbro is reassuring self-employed people and recruitment agencies that there was some good news and there are still options available that make self-employment an attractive option.
Executive Chairman Damian Broughton says: “There was some good news for contractors and self-employed people. The wave of investment in housing and infrastructure will create opportunities, and cuts in corporation tax will help, but this Autumn Statement has again targeted freelance workers.
“The Chancellor pointed out that the UK has recovered stronger than most other nations and that is down to the strength, depth and skills of our temporary workforce. They have allowed key industries to access the skills they need for growth.
“However, despite reviews into modern employment being launched by the Government and other bodies like PRISM, this Autumn Statement has a number of measures that punish contractors. These key workers are increasingly being taxed like employees, but have none of the benefits.
“Despite this, Danbro is still confident that we can provide the solutions contractors, small businesses and recruitment agencies need to support this important sector and help them seize on the opportunities the Chancellor has created.
“We must embrace freelance workers and engage with them. We need to give them the freedom to keep the skills moving so businesses are encouraged to invest, knowing they can access the expertise they need. This will become increasingly important as we approach Brexit.”
One of the key outcomes of the Autumn Statement was a decision to forge ahead with IR35 reforms in the public sector, which will see the recruitment agencies or organisations who engage the worker having to decide whether they fall under intermediaries legislation. HMRC estimates 90 per cent of the 20,000 people who operate as contractors in the public sector will be caught out.
The Chancellor also said the five per cent tax-free allowance would be removed as workers no longer had the administrative burden of deciding their status.
Danbro believes the number of contractors in the public sector is much higher and that a potential crisis is looming. Broughton adds:
“People who provide freelance skills to public sector bodies will now have to change the way they operate and, for many, work through an employment business as there are fewer incentives to have your own company. The likelihood is that these rules will also soon be applied to the private sector.
“If penalising contractors and freelancers further wasn’t enough, we also as yet have had no sight of the tool that the Government propose to use to assess these workers. It’s disappointing that we find ourselves again with no idea of what these changes actually mean and how as a sector we are supposed to work with them. The outcome of this is sure to be increased uncertainty, and as a result of this many will leave the public sector, creating a massive skills crisis.
“There are still some solutions for public sector workers and we will be working with these freelance workers and their recruitment agencies to develop the systems and the solutions they need to continue in their roles, but it will prove challenging for many.
“We’re also puzzled that the five per cent tax-free allowance has been abolished as this is supposed to be for the ongoing costs of running a limited company, not just for the initial admin burden of assessing your status.”
Other key changes are aimed at preventing “disguised remuneration”, as well as tackling the misuse of the VAT flat-rate scheme by creating a 16.5% flat rate for “businesses with limited costs.”
Mr Hammond said he was aware of the evolution in the way Britain works and said he would be looking at future changes, suggesting contractors and those in the gig economy face further regulation.
Broughton concludes: “Contractors should be concerned for the future. The Government is continuing to squeeze the lifeblood out of this sector. HMRC are tackling the abuses of the few by applying wholesale changes and this only serves to penalise the majority who operate fairly.
“This is a lazy approach and the Government must do more to understand this sector and the modern way of working so they can look at future policy and make sure Britain creates an environment that allows the temporary workforce to flourish. This will give our businesses and overseas organisations the confidence to invest in the future of the UK.”