Hammond denies freelancers of recognition
Not a single positive mention of self-employment in Philip Hammond’s House of Commons speech yesterday reflects a generally lacklustre Autumn Statement 2016 for freelancers.
Chris Bryce of freelance body IPSE seemed to sum it up best when he said that the chancellor gave “no recognition for the immense contribution the self-employed make to the economy.”
Mr Bryce added: “Having trumpeted the lowest unemployment rate for 11 years, ironically [Mr Hammond] launched an attack on the group largely responsible for this record.”
The attack that the former freelance veteran was referring to will see freelancers in the public sector who supply their services through a limited company lose their responsibility for IR35.
It will be up to the ‘paying agent’-- the end-user or recruitment agency, whichever party pays the freelancer’s limited company, to decide if IR35 applies and, if so, apply tax automatically.
This tax seachange from April wont’ affect unincorporated businesses (sole traders), although Mr Hammond was not measurably more supportive, or less persecutory, of them.
In fact, half way through his speech when covering fiscal forecasts, he blamed “rapidly rising” self-employment (and incorporation) for having a corrosive effect on tax revenues.
The chancellor mentioned “the self-employed” subsequently, but this too was negative as they were only named to be the targets of a £630million raid on “disguised earnings.”
In the AS’s full report, the Treasury explains: “This will ensure that self-employed users of these schemes pay their fair share of tax and National Insurance.”
Steps will also be taken to make such schemes “less attractive” for employers to use, by denying tax relief on contributions unless tax and NI are paid within a set time period.
The Freelancer & Contractor Services Association said it welcomed any measures that tackle disguised remuneration schemes, which it observed have become particularly complex.
“[They] entice contractors and self-employed by the high returns offered,” FCSA said. “It has become increasingly difficult for legitimate businesses to compete with these schemes.”
The association is more critical of the chancellor’s decision to yesterday to hit many VAT-registered freelancers, specifically those who use the VAT Flat Rate Scheme.
Although it said it was “not surprised” by the move – to impose a new 16.5% rate for VAT Flat Rate Scheme users who have ‘limited costs,’ the FCSA’s Julia Kermode called it unfair.
Under the change, traders who incur costs on “goods” of less than 2% of VAT inclusive turnover, or of less than £1,000 a year, will have to implement the new rate from April.
are disappointed by this change,” says Brookson, a tax specialist for freelancers.
“There will be a short period of consultation before the legislation is finalised which will commence on 5th December so the final legislation may not be published until March 2017.”
The ATT, a tax body, shares the concern for labour-only businesses – the targets of the rate hike – but struggled to make sense of it, even after reading HMRC’s technical note.
“We are mystified as to what mischief this is intended to correct,” said Michael Steed of the Association of Taxation Technicians.
“The introduction of a definition of what constitutes a ‘limited cost’ trader will inevitably complicate the FRS” which has for a long time simplified VAT rules, he said.
But another of Mr Hammond’s announcements yesterday the association welcomed – and freelancers will do to, as it will give them a much-needed breather.
In particular, the chancellor said to avoid the UK making “hundreds of tax changes twice a year,” he will scrap Autumn Statements and let Budgets be the key event for reforms.
“Mr Speaker I am abolishing the Autumn Statement,” the chancellor told the House of Commons. “Starting in autumn 2017, Britain will have an autumn Budget, announcing tax changes well in advance of the start of the tax year. From 2018 there will be a Spring Statement, responding to the forecast from the OBR, but no major fiscal event.”
Other announcements at Autumn Statement 2016 which creative industry freelancers might welcome, or find worrisome, include:
- Invest over £1bn by 2021 in fibre connections and 5G
- Probe how the tax system could be made fairer between workers carrying out the same work under different arrangements
- Spend £23bn on innovation over the next five years
- Support a new creative media centre in Plymouth
- Develop the new Studio 144 arts complex in Southampton
- Promote cultural education in schools via a Royal Society of Arts pilot
- Provide £7.6m for urgent repairs at Grade 1 listed Wentworth Wood House
- Amend the tax treatment of freeplays for remote gaming
- Invest £390m in low emission and driverless car technology
- Fund initiative to boost management skills across businesses
- Give London greater control over delivery of employment support services
- Publish strategy for addressing productivity barriers in Northern Power House
- Pour in hundreds of millions to Local Enterprise Partnerships
- Review R&D tax credits and provide an extra £2bn a year in R& D funding
- Consolidate Oxford and Cambridge as a transformation tech corridor
- Cancel planned fuel duty rise
- Personal Tax-Allowance set at £11,500
from April, rising to £12,500 by 2020.