Budget 2016 – As expected but some reprieve for PSC’s

Travel & Subsistence relief for agency and Umbrella workers:

What has been at the top of the agenda for many recruiters since the announcement in Budget 2015 is the Chancellor’s proposal to remove travel and subsistence relief for Contractors engaged through an employment intermediary. Notwithstanding confirmation of the plan to proceed with this policy in the Autumn Statement and the publication of draft legislation, many from the sector, off the back of a sizeable lobby, hoped for a last minute reprieve. Alas, no such reprieve. Yesterday the Chancellor confirmed that he will press ahead with the planned changes in April 2016. Final legislation should appear in the revised Finance Bill on 24th March, without further material changes expected.

IR35:

Also in Budget 2015 the Chancellor announced a review of IR35. Many in the sector viewed this with a degree of trepidation given the sweeping changes to legislation that have already affected those Contractors who were sole traders and now those who are Agency or Umbrella employees. Post discussion, it seemed that the Chancellor was intent on far reaching changes to the existing IR35 legislation which would be effective as of April 2017.

There is however this morning the feeling for many of a reprieve. Yesterday the Chancellor confirmed that changes to IR35 will only affect those Contractors being supplied to the public sector. In the new proposals (which are subject to a full consultation);-

  • From April 2017 a public sector body will be responsible for deciding whether IR35 applies to an engagement they undertake with a PSC.
  • Where the services are provided through an agency or other third party, it will be the responsibility of the party paying the PSC to assess the position.
  • The entity paying the PSC will have to deduct the correct tax and NI on the “Deemed” payment (calculated in accordance with the current rules) and account for this via their own RTI returns.

Whilst this is not good news for those supplying public sector Contractors, it seems the government is determined to put its own house in order before expanding any of the proposed changes to the private sector – which of course could take some time!

Given the detrimental impact of this Chancellor’s successive budgets on our sector, you might be forgiven for thinking he doesn’t envisage Contractors being part of the ‘next generation’. So what now for those who will be significantly out of pocket as a result of these changes?

As always, there is light at the end of the tunnel. Anderson Group have developed innovative solutions to enable Agencies and Contractors to meet and match these challenges and remain compliant, competitive and sustainable post April 2016. If you would like to arrange a meeting, we would be delighted to hear from you.

Please contact 0333 8000 800

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