Crushing the flexible workforce?
With recent changes to Travel & Subsistence allowances for contractors working through an umbrella company, the government continues to put a real squeeze on the benefits of being a flexible worker. The UK has benefitted immensely from the flexible labour market, but the continued changes and red tape will make it less attractive to be flexible, and more expensive to buy flexible
I am now astounded by the latest proposal, that from April 2017, for any contractor working through their own company for a Public sector client, it will no longer be the contractor who is responsible for deciding whether IR35 applies, but will instead be the client or the recruitment firm if one is involved. AND furthermore, if the rules do apply, the third party will be responsible for PAYE and NI deductions (or will be liable for these if the IR35 rules have been broken)!!!!
You may want to read that again just to be sure you read it right!
I see many issues with this from the word go, including:
-The private sector will find itself competing on an uneven playing field, struggling to attract the best talent (and in particular, the NHS, who are already hand tied with rate caps – an honourable but faulty attempt to control spend). The Government seems to miss the fact that contracting does not come with the benefits of employment (sick pay, pension, holidays, maternity pay, employment protection etc etc) and therefore has to pay more to compensate)
-Can a third party really be responsible for paying the tax of another COMPANY
-Are contractors really going to want to provide all the information required to enable RTI reporting on their behalf. It was hard enough to get the information required for the HMRC intermediaries legislation reporting (ie home address, DOB, NI etc) from contractors who, for 20 years, were used to just supplying the Ltd co. info.
And one thing that is surely never taken into account when making these sweeping changes is the cost to the economy of the time and effort taken to comply, which must surely outweigh and increased tax revenue. In a supposed world of reduced red tape (hmmm), yet another sledgehammer is being wielded to crack the proverbial nut.