Chancellor’s reforms weaken UK economy

KPP have widely criticised Chancellor Philip Hammond’s recent claim that he is building “an economy that works for everyone” in his autumn statement. As an accountancy firm, KPP argue that the government doesn’t understand the modern way of working in Britain and that he has left millions out of pocket. These huge reforms greatly challenge the way public sector contractors are paid & enforce what is essentially a cash grab on the self-employed. The government is yet again punishing Britain’s 5 million small businesses & contractors, potentially weakening prospects even further ahead of Brexit. Thankfully we are able to reassure many recruitment agencies & self-employed people that there is some good news and some options available to encourage people into self-employment.

Our Director Stephen Usher says:

“Despite the autumn statement targeting freelancers, there is some good news for contractors & the self-employed. Opportunities will be created thanks to the wave of investment in housing and infrastructure. Cuts in corporation tax will also help. Despite this, the autumn statement has once again targeted freelancers.

 The Chancellor claims that Britain has recovered in a much stronger position than other nations because of the strength & skills of our temporary workforce and because they have allowed key industries to access the skills they need for growth. However despite the government launching reviews into modern employment & bodies like PRISM, the statement still punishes contractors. These people are taxed the same as employees but have none of the benefits that normal employees enjoy.

 However, KPP can still provide the right solutions for small businesses, contractors & agencies to help them seize on the opportunities recently created by the Chancellor. The best way to do this is by embracing and engaging with all freelancers. We must help them to improve on their skills & encourage them to invest so they can access the expertise they so greatly need. The fact we are approaching Brexit so rapidly only makes this more important.”

 The autumn statement has brought about a decision to go ahead with public sector IR35 reforms. This will leave organisations & recruitment agencies that engage the worker having to decide whether they fall under intermediaries’ legislation. HMRC estimates 90 per cent of the 20,000 people who operate as contractors in the public sector will be caught out. The Chancellor also said the five per cent tax-free allowance would be removed, as workers no longer had the administrative burden of deciding their status.

At KPP we believe that the number of contractors in the public sector is much higher and thus a potential crisis is looming. Usher adds:

“As there are fewer incentives now to have your own company, people who freelance their skills out to public sector bodies will have to change the way they currently operate and for many, work through an employment business. Chances are, these rules will also be added to the private sector soon.

 As yet, we have no insight into how the government plans to assess these workers. So once again we find ourselves with no real idea as to what these changes mean & how we are meant to work with them. This increases uncertainty and will probably result in many people leaving the public sector, which in turn will create a massive skills crisis.

 At KPP, we plan on working with freelancers and their recruitment agencies to find the best solutions for these public sector workers. We plan to develop the systems & help find the solutions they need to continue their roles. But we’re also confused as to why the 5% tax-free allowance has been abolished, considering that this is supposed to be for the costs of running a limited company and not just for the initial admin burden of assessing your status. Other key changes are aimed at preventing “disguised remuneration”, as well as tackling the misuse of the VAT flat-rate scheme by creating a 16.5% flat rate for ‘businesses with limited costs.’

 The Chancellor claims to be aware of the evolution in the way the UK operates and said he would look at future changes, hinting contractors and those in the gig economy will face further regulations.”

 Usher concludes:

“As a whole we should be concerned for the future. The government is continuing to squeeze the lifeblood out of this sector. HMRC are tackling the abuses of the few by applying wholesale changes but this only serves to penalise the majority of people who operate fairly.

 The government must do more to understand this sector in order to look at future policy and make sure Britain creates an environment that allows this temporary workforce to flourish. The result will be businesses & organisations from overseas with enough confidence to invest in Britain’s future”.

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