Winter Economy Plan 2020: 'Demonised' contractors offered 'nothing whatsoever'

The dust starting to settle on Thursday’s Winter Economy Plan has made advisers to contractors more critical of the chancellor’s package than their initial response of ‘irrelevant.’

Qdos says Rishi Sunak left contractors “stranded”, the FCSA says he imposed “greater financial burdens not less”, and Bauer & Cottrell says he ‘overlooked them once again.’

The criticism stems from Mr Sunak’s showpiece to help firms face covid-19, the Job Support Scheme, not necessarily applying to PSCs or, if it does, applying too lightly to help much.

'Very little of interest to contractors'

If it applies, Orange Genie today crunches the numbers for PSCs with a salary of £792 to reveal a tiny handout from the chancellor of £177, in an exclusive analysis for ContractorUK.

Or on £732 a month, SJD Accountancy calculates directors could be looking at even less from the state -- £163.48, when the scheme takes over from the CJRS on November 1st.

“There’s very little of interest to PSC contractors in the Job Support Scheme [even] if we assume eligibility, although that’s not clear yet,” said SJD’s technical manager Joanne Harris.

“I [therefore] think the best news for limited company contractors is the ability to pay deferred VAT and self-assessment payments on account in 11 equal instalments.”


Indeed, Mr Sunak said on Thursday that PSCs which deferred VAT payments between March and June, which were due in March 2021, can spread the liability over the following year.

Similarly, he announced that their self-assessment payment on accounts, which were due to be paid by January 31st, can also now be spread over the following tax year of 2021-22.

But Phil Pluck, the new CEO of the Freelancer & Contractor Services Association is “disappointed” that the contingent workforce was not made part of a “wider fiscal stimulus”.

“With extensions to VAT repayments and loans, many businesses could be in debt for another 10 years -- a frightening prospect,” echoed a concerned Kate Cottrell, an IR35 expert.


She was referring to the Winter Economy Plan offering Bounce Back Loan recipients a new decade-long repayment option, mirroring a new 10-year term option for CBILS lenders.

“The [chancellor’s] measures around loan schemes, and tax deferrals, will reassure swathes of companies,” said the Institute of Directors, sounding grateful but not celebratory.

“[The former is a] sensible precaution. That these changes come alongside an extension to emergency insolvency measures…will be a double-boost for struggling companies.”  

On Thursday, Opus Restructuring will spell out the implications for PSCs of those extended measures, such as restrictions until December on wind-up petitions, exclusively on ContractorUK.  

'Potentially very costly'

But tax experts are issuing alerts already. “[Increasing the term of a BBL from six to ten years] will undoubtably help some contractors get through these difficult times,” begins SJD.

“Yet it is still a debt that the business will need to carry…[before repaying and] it is also a loan to the business, not the individual.

“And paying for personal expenditure through the business account will give rise to a director’s loan, which could potentially be very costly at year-end.”

The accountancy firm explained: “Remember, any balance outstanding as a director’s loan at company year-end would be subject to an S455 charge at 32.5%. There is potentially a benefit in kind charge to consider also, if the balance of the director’s loan exceeds £10,000.”

'Very little to no support'

Advisers acknowledge that the newly repackaged BBLs are likely to be popular as a means to cover wage costs, but some say that smacks at the problem with Mr Sunak’s package.

“Most of the measures announced by the chancellor….offer support to businesses with employees,” observes the CEO of IR35 reviewer Qdos, Seb Maley.

“Millions of people working for themselves via their own limited company have had very little to no support for six months now.

“Yet it will be these independent workers who will prove crucial to the UK’s economic recovery -- they will provide businesses with flexibility and skills at a time when they need them more than ever.”

Neil Carberry, chief executive of agency staffing body REC echoed: “The lack of support for small owner-operating directors of businesses remains a gap in the structure of government support that we would like the chancellor to address. These people are key to the recovery of our small businesses.”

'Complicated, ever-changing'

At IR35 firm Bauer & Cottrell its co-founder agrees, saying that while the Winter Economy Plan is an “ill-wind that blows nobody any good, maybe – just maybe” it could necessitate:

“A move by [public and private sectors] to use PSCs or umbrella contractors to build all the new systems that are going to be needed and get projects delivered.”

Moreover, it is hard to envision workers bar contractors who can be hired quickly to deliver “complicated, ever-changing support packages” like the coronavirus ones, Ms Cottrell added.


But a lobby group for limited company directors, Forgotten Ltd, indicates that the government is far from supportive of flexible workers who have set up a company to do business.

Ahead of a written address to Mr Sunak, to be published exclusively on ContractorUK, the group said: “Imagine being demonised [by the government]…for seven months.

“Such is the fate of directors of small limited companies. The chancellor refuses to listen [or even] to answer questions by MPs.”

'Nothing whatsoever'

The group was referring to the SNP’s Alison Thewliss, who on Thursday asked the chancellor why his Winter Economy Plan offered PSCs “nothing whatsoever,” only for him to duck her question and not provide any corresponding answer.

Saying there was nothing in the plan to help her, a Forgotten Ltd supporter reflected last night: “The government is happy to take the huge corporation tax bills and VAT payments from these individuals. It should therefore be supporting them, not punishing them.”

Sounding aware of those ‘punishments,’ an expert on the April 2021 off-payroll rules said a helpful, and “bold” move by Mr Sunak would have been to “U-Turn” on the IR35 reforms.

'Taxes will rise for the self-employed'

Another expert on the incoming rules, Rebecca Seeley Harris suggests some PSCs might actually be relieved that the IR35 screw was not tightened, as it is set to be for sole traders.

“I had been expecting [worse] to be honest,” said ReLegal Consulting founder said of the chancellor’s plan.

“It is an unfortunate likelihood that taxes will rise for the self-employed -- at some point. But I would hope that with the reforms to off-payroll working in the private sector currently scheduled from April 6th, that the government now leaves PSCs alone.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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