Government to Abolish Contractors Next Year?

Plan to Abolish Contractors

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Speculation is running rife in the contractor community that the Chancellor will publish plans in the upcoming Autumn Statement that would effectively abolish contractors and contracting in the UK fron next April.

Reports of such have been in the national press and on contractor websites.

We already knew that he had plans to stop umbrella company contractors and Personal Service Company contractors claiming travel and subsistence allowance against tax.

That, alone, would be enough to scupper many umbrella companies as there would not be the financial incentive for contractors to use them in the future.

After all, why pay a monthly feeto umbrella companies just for them to pay you when you can’t claim very much back in terms of expenses against tax from next April?

Abolishing Personal Service Companies

Now, it looks as if the Chancellor wants to go much further and virtually abolish contractors and abolish contracting altogether.

The speculation in the national newspapers and contractor press is that he is going to stop contractors working through intermediaries, i.e. personal service companies and umbrella companies.

Supposedly, any contractor who spends mroe than a monh at a particular company will be forced to go on the payroll.

There will be the choice of either going on the payroll of the company ’employing’ the contractor or the agency.

One would think that client companies wouldn’t want contractors on their books so, effectively, contractors would, in future, be ’employed’ by their agency with all the horrors many contractors would feel that would entail.

Avoidance of National Insurance Contributions

It seems, though, that the Government want to crack down on the avoidance of national insurance contributions both by contractors and client companies.

This is a very big sledgehammer they are going to take, though, to crack this particular nut.

After all, there are almost 5m self employed workers of one type of another in the UK.

Contractors on Company Payroll

Clients woud be much less likely to take on contractors if they had to take them onto the payroll after a month.

The payroll would probably not be able to cope. After all these contractors are very different from normal employees and would not be entitled to the benefits that they get. They may end up only on the payroll for three months or so.

Clients would have to spend more money on their payroll systems to accommodate these new ’employees’.

Contract Rates Would Fall

So, many client companies would be a lot less likely to hire contractors, pushing the number of contracts available down with the resulting effect on contractor rates.

This sounds like the latest hare-brained scheme by the Chancellor to hammer contractors.

Labour were hated by contractors because the brought in IR35 and Fast Track Visas for overseas workers.

Conservative Government and Contractors

However, it looks as if Chancellor Osborne and the Conservative Government, now unconstrained by the LibDems, are going to go much further than Labour and effecively abolish contractors altogether.

The ineffective contractors group, IPSE, (ex-PCG) are the only contractor representatives – and they have given the Tories pretty much a free ride in the past.

One only hopes that common sense prevails and that the Chancellor doesn’t constrain the flexible workforce in order to bash contractors and extract his pound of flesh.

Limited Partnerships for Contractors

Wiht umbrella companies in trouble, the new kid on the block for contractors is Limited Partnerships.

To find out more click on Limited Partnerships for Contractors