The Chancellor’s current look at the financial plan raised awareness about the growth of the economy. It was estimated that there was a reduction in growth from 2.1% to 1.7% which verifies that progress is slower than previously thought.
We’re pleased to see that the Chancellor intends to address the flexible workforce with his recent proposal of ‘economic ambitions’. Unfortunately we have yet to see any measures with reference to improving the flexibility of the existing workforce.
Initially we feel that the value of professional contractors and self-employed professionals has not been recognised in Budget decisions. However, we are pleased to see that the Government has stood by its promise and taken action to try and stimulate growth for the UK’s economy.
We welcome the commitment made by the Government to improve administration of IR35 nonetheless we remain concerned over the merging of National Insurance Contributions (NICs) and Income Tax.
To conclude, we are evidently aware of the Government’s attempts to put measures in place to stimulate growth and this is encouraging, we believe this year’s Budget shall be “revenue neutral”, focusing its attention on specific areas to see the economy into recovery.
Merger of NICs and Income Tax
A main focus for growth has been to motivate small to medium-sized enterprises by simplifying the tax legislation, an example of which includes merging NICs and Income Tax. Although we welcome the Government’s attempt to address the issue of tax simplification, it does raise concerns over how this particular proposal will affect contractors and freelancers.
The assumption that a “one size fits all” theory will benefit self-employed and employed is wide off the mark; it will prove to be ineffectual and more importantly it’s won’t address the needs of contractors and freelancers. Although we can assume that the Government will be conducting a long consultation period, any such merging needs to accommodate the knowledge-based workforce so that it can fully contribute to the emergence of a better economy.
Following on from the recent interim report from the Office of Tax Simplification, we’re reassured to see that, an advancement of an approved and suitable medium-term solution has been put in place, and furthermore the Government has decided to commit to constructing a clearer management of IR35, as opposed to the complete removal of the legislation.
We’re aware of the irritation that IR35 causes for self-employed professionals; however, we believe that an abrupt suspension or removal of IR35 could result in long-term financial harm for this section of the workforce. Increased tax evasion will inevitably arise without this legislation and could easily result in the Government being hurried into the wrong medium-term solution which would create much greater problems for professional contractors and the self-employed generally.
It is encouraging to see that the Government’s current outlook of the IR35 is equivalent of ours because it offers an opportunity to observe the current legislation and consider improvements that could be made to it. Moreover, the present situation provides us with clarity and offers more support and advice for freelancers and contractors.