Categorized | finance, news

Budget 2015: contractors must feel stabbed in the back

Let’s call it, because everyone else is being polite about it. George Osborne has plunged a dagger into the heart of the self-employed community with his ’emergency’ budget. Contractors’ contributions to the UK’s economic recovery this last two years? The Chancellor has all but forgotten them, based on today’s evidence.

And those now-familiar rallying cries from the Conservatives, saying they’re behind ‘hard working families’? Looks like that herald excludes households whose breadwinner operates through a Limited Company. Not that there’s anything wrong with ’employed’ working families getting their just rewards. Far from it.

The issue is this: setting up and creating a limited company takes balls, courage and commitment. It’s not like clocking on or playing on a level field with staff, which this budget seems intent on promoting.

As a limited company contractor, you:

  • sacrifice the luxuries of maternity, sickness and holiday pay;
  • pay accountants out of your own pocket (rather than have payroll administer it);
  • market your service or skill in the market without a brand (other than the one you create) behind you;
  • move Hell and high water to get to clients sites to provide the specialist skills that they neither have nor are willing to train their staff for.

It’s this ‘can-do’ attitude of contractors and their willingness to help kickstart the UK economy that’s helped bring about the beginning of the end of recession. And this budget is the thanks for it?

The recent drafting in of outside help in order that the government can understand self-employment better? They need it more than anyone could have conceived.

Biting the hand that feeds you

For months and months, self-employment buoyed the country’s employment figures. Since taking power, we’ve heard Tories announce (at every opportunity) that there are more people in work than ever.

But they seem to have overlooked one key factor. There are also more self-employed people in work than ever, many of them contractors. There are:

  • IT Contractors building the frameworks in order that employers can bring in more staff;
  • doctors and nurses contracting to myriad NHS Trusts, actions that have helped prevent the health service collapsing under the weight of the UK’s largest population ever;
  • civil engineers lending their expertise to companies on an ad hoc basis all over the country;
  • oil and gas contractors working hard and long to end our dependence on Russia for fossil fuels.

It’s all these gutsy, self-employed limited company owners, and more, who are returning Britain to the forefront of technology and recovery once more.

It’s not about the money, money, money (ka-ching, ching)

Many, many of these key operatives contract through their own Personal Service Company. What Mr Osborne doesn’t seem to understand is that choosing to work this way is about so much more than the money. Yet that’s what this budget has focused the world’s eyes on.

The ensuing policies all but say: “if you’re a single-employee limited company owner, you’re in it to save on your tax bill.” That’s not only wrong, it’s tantamount to slander. What limited company contracting is about is:

  • individual contractors striving to build a brand, as well as provide a service;
  • creating the right impression – home and abroad – with a Ltd. after that brand name;

    • (this, in turn, opens doors to tenders that sole traders, freelancers and foreigners cannot);
  • separating you, the entity, from any debt your company accrues, otherwise risking being thrown on the mercy of the State, should your business falter.

Money is often the furthest thing from an individual’s mind when they start up for themselves. They become successful because they fulfil a need, and this country has been needy this last few years.

Yet how has the Chancellor repaid the very people to whom he, and the country, owes so much? A double-pincer attack, that’s how. Let’s introduce this as Crowded House once did:

Four Seasons in One Day

Spring: it’s (up) in the air

Dividends: A tax-free allowance of £5,000 will take the place of the tax credit limited company owners claim against dividends.

The office for tax simplification may have a word or two about this, as all manner of convolution springs to mind at the thought. That’s not to mention the high-earning contractor, who’ll feel the pinch over the fiscal year.

Summer: (time) Blues

Employment Allowance: In an attempt to focus Employment Allowance “on businesses and charities that support employment”, where a contractor is the “sole employee” of a limited company, they “will no longer be able to claim”.

That’s another cool £2,000 down the Old Kent Road.

Autumn: (what the) State meant:

Umbrella (open) season: As we expected, discussions have now begun in earnest, re: scrapping of travel and subsistence for umbrella employees.

Yes, the new term is those under supervision, direction and control. But anyone offering their service through a PSC or umbrella company may want to consider their payment structure.

Winter: to summarise dis content

IR35: We heard that the taxman was investigating fewer cases of IR35. We wondered whether SDC would replace it. HMRC‘s lack of comment, however, did also cause us concern.

We were right to be worried. The government will publish a new discussion document about IR35 once the dust has settled from this summer emergency budget.

Once again, limited company contractors will be beholden to their accountants. Their accountants, come next Spring when many of the measures kick in, will be charging more because of the extra work this budget has created. This extra work the budget has created is so counter productive to the Tory philosophy of rewarding hard working families, it’s scary that Osborne has got it soooooooooo wrong.

What you give is what you get

The whole ethos of creating a Limited Company says a lot about the individual behind the brand. They believe that their skills set them apart from the pack. They believe that by taking on the extra responsibilities outlined above, they deserve more reward. And so they should.

But, based on this budget, the government looks set to pursue the single-employee limited company in a ruthless manner. The fear is that many people who could otherwise aid recovery and the government’s plans for long term growth will choose not to.

We said above that it’s not about the money. But what about when the costs of running your business outweigh that of just turning up and working for the man? On this basis, there’s going to be a fine line in the financial reward between contractors and employees.

Who then, in their right mind, is going to put themselves out like contractors do now, just so that we can [be] in it together? My vote? Ozzy Osbourne could have made a better job of this emergency budget than his namesake. Or is that just too Paranoid?

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