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Rumoured tax grab on contractors

Rumoured tax grab on contractors

Just when you thought politics in the UK couldn’t get any more frustrating, disorganised and….well…mental, chancellor Phillip Hammond might have something very displeasing up his sleeve.

Ahead of the 2017 budget announcement, rumours have surfaced claiming that Hammond is eyeing up a £1 billion pound tax raid on freelancers and contractors in UK.

The party line is apparently to tackle ‘disguised employment’ in the private sector, but the move stinks of a tax grab whereby companies would be likely to add contractor workers to their salaried payroll, thus boosting tax rates.

If this comes to fruition, it wouldn’t be dissimilar to the IR35 reforms that have proven so damaging to the public sector.

Many companies placed contractors on their payroll en-masse, and lost workers as a result. The impact of this has recently been acknowledged by major public organisation Transport for London, and others could well miss targets as a result.

There’s no reason to assume that the same won’t happen in the private sector. Companies will be reluctant to assess the IR35 status of all their workers, will likely place all workers on their payroll, and contractors won’t stand for it. The damage could be huge.

Now we’re not saying that there’s not a single example of ‘disguised employment’ in the UK. But it’s like catching thousands of sprats for that one mackerel.

It’s a misguided and unfair approach, as contractors have to take extra steps to pay their taxes and do miss out on many of the benefits of full time work as a result of contracting.

Now at this stage, there is nothing set in stone, as Mr Hammond is presumably still dotting the i’s and crossing the t’s on his upcoming budget announcement. But the contractor community will make its voice heard I’m sure, and the recent lessons from the public sector should certainly be heeded before any decisions are made.