Budget outputs summary – 11th March 2020
Newly appointed chancellor Rishi Sunak today delivered the first financial statement of Boris Johnson’s majority government. We look what this budget means for the flexible workforce supply chain.
As expected, the Government is pressing on with the introduction of IR35 changes for the private sector, acknowledging this in the budget detail with “the reform will be legislated in Finance Bill 2020 and implemented on 6 April 2020, as previously announced”.
Whilst we aren’t surprised that there were no last minute changes, we are disappointed in the way HMRC have managed the roll out of these changes and the way that large proportions of private sector organisations have failed to prepare adequately, even with a relatively long lead in period.
Despite the Government providing adequate time to allow businesses to prepare for the changes, which will see hirers given the responsibility to determine a contractor’s IR35 status, we are surprised by the number of large private sector organisations who have not stepped up to the plate and supported their valuable flexible workforce. Examples we have seen include businesses banning the use of personal service companies all together or blanket assessing all of their flexible workforce as being “disguised employees” without offering them any employment rights.
On the flip side, those businesses that have taken the time and dedicated the resource to understanding their supply chain and assessing status correctly are continuing in a business as usual state. Brookson have helped hundreds of private sector end hirers and thousands of recruitment agencies to navigate these changes through audits of their workforce, providing IR35 assessments of incumbent contracts and managing supply chain compliance. This work will continue post April as these services now become the norm in the flexible workforce.
In our Autumn Budget 2018: Key Outputs blog, we warned that end hirers and recruitment business who fail to manage their new obligations could face serious commercial implications, whilst those who continue to support genuinely self-employed contractors will benefit significantly from this change. With the 6 April 2020 deadline looming, this warning could never be truer.
For contractors who are still in the dark about how these changes will impact them, now is the time to speak to your agency and end hirer to understand their plans for April and instigate the process to ensure your contract is fairly assessed. If you have been found to be working on an inside IR35 role, you should carefully consider your options going forward and avoid being tempted to get involved in the various tax avoidance schemes being peddled to contractors.
For hirers carrying this new responsibility from 6 April, you should ensure you have met your reasonable care requirements and have not exposed yourselves to commercial risk. These obligations continue post April 2020 and will be the new BAU.
The Government have said they will encourage HMRC to take a light touch approach for the first few months of these changes, however, only time will tell what the full ramifications and unforeseen consequences of this change will be on the flexible workforce and the broader UK economy.
More broadly and in response to the Loan Charge Review, the budget also announces legislation in the Finance Bill 2020-21 “to take further action against those who promote and market tax avoidance schemes”. This will include stronger powers to investigate and penalise tax avoidance schemes posing as umbrella companies, so it is imperative that contractors, recruiters and hirers conduct due diligence on the partners they chose to work with post-April 6.
A Tackling Construction Industry Scheme (CIS) abuse proposal also promises to crack down on compliance, announcing a “consultation which introduces options on how to promote supply chain due diligence.” We look forward to contributing to this consultation in due course, and hope that learnings and best practice can be applied to other sectors as well.