Spring Budget 2021 – Outputs
Chancellor Rishi Sunak today delivered his much-anticipated Budget Statement, setting out how the Government will extend its economic support to reflect the “reopening of the economy”.
In terms of issues directly impacting the flexible labour market, perhaps unexpectedly, there was no mention of the off-payroll (IR35) reforms in either the Chancellor’s speech or in the detailed budget documents (other than an expected tidy up of the legislation, including to clarify that umbrella companies are exempt from the new rules, as originally intended). This is a clear indication that the Government see this reform as done and dusted, with the legislation already being finalised and HMRC ramping up their education programme to ensure businesses are ready for the 6th April 2021 roll out. This is a further indication that there will not be an additional delay and the changes will go live on 6th April.
Whilst we aren’t surprised that there were no last-minute changes, we are disappointed that despite HMRC and various stakeholders in the market encouraging businesses to be ready for this change, large proportions of private sector organisations have failed to prepare adequately, even with an unusually long lead in period.
Despite the Government providing more than enough 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 addressed this change adequately to support their valuable flexible workforce. We continue to see businesses banning the use of personal service companies (limited companies) all together, or blanket assessing all of their flexible workforce as being “disguised employees”, without offering them any employment rights.
In our previous Budget output blogs, we warned that end hirers and recruitment businesses 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 6th April 2021 deadline looming, this warning could never be more true.
Whilst HMRC have committed to taking a light touch approach for the first 12 months of these changes, they will still expect the correct tax to be paid and mistakes could be costly, 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.
On a more positive note, those businesses that have taken the time and dedicated the resource to understand their supply chain, assess statuses correctly and implement compliant payroll provisions, are well placed for working under the new norm with minimal disruption. Brookson has 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 will enable BAU in the flexible workforce.
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 an inside IR35 role, you should carefully consider your options going forward and avoid being tempted by the various tax avoidance schemes being peddled to contractors. Flexibility is now needed in the way you operate and the support of one trusted advisor to help you to manage your inside and outside assignments will prove valuable to you going forward. Brookson customers can now benefit from our unique service called Flex, which allows contractors to switch between limited and umbrella working with a wrap-around of specialist accountancy, tax advisory, legal and financial services tailored to your circumstances.
More broadly, whilst it is welcome to hear of the extension to the furlough scheme to support employees and the SEISS scheme for the self-employed, it is frustrating that government has still not provided any suitable financial support for limited company contractors or sought to make the furlough scheme suitable for umbrella company employees. Disappointingly, it appears that a large chunk of the flexible workforce continues to be overlooked by Government.
For key financial outputs announced in the budget, read our guide (produced by Brookson One).