Brookson’s reaction to Chancellor George Osborne’s Autumn Statement 2013

Following the Chancellor’s announcement Brookson’s MD Martin Hesketh shares his initial views on how this year’s Autumn Statement impacts the UK’s flexible workforce.

Overall I think today’s Statement is positive with no new measures introduced which should have a detrimental impact on the genuinely self-employed. My view on the key points to emerge from today’s announcement are summarised below.

Positive recognition of the genuinely self-employed

I am pleased that the Government has formally shown its support for contractors, freelancers and self-employed professionals and has gone as far as saying that it “believes that the tax system should continue to recognise the additional risk someone who is genuinely self-employed takes on”.

The UK’s flexible workforce is clearly critical to driving the economic recovery, we have long stated this is a key competitive advantage for the UK economy and it is really heartening to see the Government now beginning to genuinely recognise this. They are committing to “supporting enterprise and those who choose to work for themselves” which is a tangible commitment to a significant part of the UK’s flexible workforce.

Further stability in the legislative framework

In that context, I am pleased that no specific announcements regarding the use of personal service companies (PSCs) or IR35 were made. As referenced in my recent predictions piece we don’t need more tweaks or sticking plasters to existing legislation, we just need better enforcement of what we have got. It is right that HMRC and the IR35 forum are continuing with their administration and enforcement improvements as the Chancellor committed to in Budget 2011.

I believe genuinely self-employed contractors and freelancers will welcome this stability – better the devil you know – as they concentrate on supporting the economic recovery over the coming years. These are points I plan to reiterate later this month in my attendance at the House of Lords select committee regarding the use of personal service companies.

Tackling tax avoidance

I agree with the Government’s view that significant progress has been made over this Parliament to tackle the avoidance of employment taxes. Specifically by combating pay day by pay day models, avoidance by Employee Benefit Trusts (EBTs) and ensuring the correct income tax and NICs are paid by employers and employees when offshore employment intermediaries are used.

Furthermore, today’s announcement that one of the next steps in mitigating tax avoidance will be to prevent end client companies from avoiding paying employer NICs and meeting their employer obligations by using “employment intermediaries”. My initial interpretation is that this announcement has been made to target the practise of ‘industrial avoidance’ by end client companies engaging employees as sole traders; an avoidance technique particularly impacting lower paid, lower skilled and potentially vulnerable temporary workers.

This anti-avoidance measure is expected to be legislated in April 2014 and raise around £400 million each year. At this stage there is no further information on how the Government plan to amend existing legislation to address this but I would hope it is introduced with adequate consultation so as not to inadvertently impact the genuinely self-employed workforce and those employed by compliant umbrella companies.

Simplification of the tax system

The Chancellor has today confirmed that HMRC will implement the recommendations made by the Office of Tax Simplification (OTS) to simplify the taxation of employee benefits and expenses. This is of particular relevance to limited company contractors and umbrella employees and we hope it will provide more clarity and guidance regarding the rules for claiming tax relief on travel and subsistence costs.

Final thoughts

All in all the Autumn Statement provided significant grounds for optimism for the UK’s flexible workforce and the economy as a whole. Specific announcements regarding further investment in infrastructure and green technologies, for example, will provide opportunities for contractors and recruitment businesses alike.

This is the first time in recent years that The Chancellor has so formally recognised his support for the UKs self-employed workforce and I will continue to lobby hard for this sector to be supported by Government. I am also keeping a close eye on the work being done by the Government and HMRC to tackle false self-employment in the temporary labour market to ensure this does not inadvertently impact the genuine self-employed workforce.

Finally, a detailed summary of the changes to tax and national insurance rules relevant to contractors, freelancers and self-employed professionals can be found in Brookson’s Free Autumn Statement 2013 Summary Guide.