Osborne warned against a cap on contracting

George Osborne would risk a revolt from his own parliamentary colleagues if Autumn Statement 2015 contains a reported plan to ban PSC contracting for more than a month.

In fact, “a number of politicians” would likely challenge the chancellor if he unveils the ‘one-month-then-payroll’ clause on November 25th, says the Freelancer & Contractor Services Association.

The employers’ group, the CBI, which will apparently have a say on the reported plan at its annual conference this week, would likely object too, believes FCSA chair Julia Kermode.

“There are some 4.6m self-employed workers in the UK who will have to go on the payroll of each of the clients they work for after a month if this [reported] legislation comes into force,” she said.

“That is a huge administrative burden for UK plc who will suddenly find themselves having to deal with a significant amount of workers on the payroll”.

Kermode spoke of the “statutory benefits” which, presumably, would accrue and be payable to the worker by the employer, in the event that 'off-payroll' PSCs become taxed like 'on-payroll' employees.

The Association of Independent Professionals and the Self-Employed says it is urgently trying to clarify whether an effective ‘one-month’ cap on contracting is “under serious consideration.”

“This would make operating a freelance business almost impossible in many instances, and would cause untold damage to the flexible economy,” warns IPSE chief executive Chris Bryce.

“This measure was not contained within the government’s original consultation documents and has not been raised by the government with stakeholders in its regular IR35 Forum meetings.”

But nasty surprises are what the contractor industry has had to get used to, and more ‘devil in the detail’ is likely - even if the one-month cap comes to nothing, a services provider said last night.

It warned: “[We] don't think anything will be said of much interest to contractors and how they are paid in the Autumn Statement. Eyes should be on the 2016 Finance Bill and not just the amendments we know about”.

However, another services provider says the current concern about how contractor pay levels will suffer under the chancellor’s proposals – like the new dividend tax and ‘SDC’ or the ‘one-month cap’, is misguided.

Carolyn Walsh, a director at CWC Solutions told ContractorUK: “Many organisations that represent or provide services to contractors…have said that they believe they will suffer losses and that contracting 'won't be worth it in future'.

“But if perceived losses are down solely to paying more tax in future, that's not really a business issue, more a concern over take-home pay and I propose that this is a counter-productive argument.

“In practice, genuine business-owners concern themselves with gross profit; being overly concerned with net pay could leave some contractors with a question mark hanging over their contractor status if a more business-like approach to the expected changes is not taken.”

The FCSA suggests that such a question mark is already there - at least in the Revenue’s eyes.

“HMRC is intent on ‘making IR35 more effective’” said Ms Kermode. “[This] means collecting more tax for the chancellor and levelling the field between [an employer’s] direct employees and their workers. 

"It's an utter nonsense and from discussions I have had with a number of politicians there is no political will to support Osborne on this move - I cannot see the CBI being in favour of it either."

She added: “We are very worried that hirers will simply not engage freelancers and contractors at all which will defeat the whole purpose of a flexible freelance workforce which is enabling businesses to be agile –  it is unthinkable that government might be prepared to jeopardise this with an ill-thought-through move."

Nov 10, 2015