The government’s stated expectation that hirers will pay contractors a rate “sufficient” to still attract them once their tax relief on expenses is curbed appears to be a major miscalculation, it was reported by the Contractor UK website.
The news release then goes on to quote a recent poll conducted by the Freelancer & Contractor Services Association, in which of 470 businesses surveyed, 92% of those hiring contractors will refuse to compensate all such workers from April, when legislation restricts their Travel and Subsistence (T&S) relief. This is a far cry from the government's expectation that businesses would increase wages to a level still sufficient to attract workers without any special tax subsidy.
And although an estimated £505million will be raised for the exchequer as a result, the T&S legislation has been assessed by the officials behind this estimate to exert only a “negligible impact.”
This is despite their impact assessment listing three burdens – a need for engagers to identify ‘SDC’ workers; a need for them to agree an information-flow process and a “rise in the direct cost of hiring”.
Whilst many contractors are now aware of the impending changes to the T&S rules and other measures which arguably harm the UK's flexible workforce, there are likely to be an even greater number for whom the April measures will come as a particularly unpleasant shock as they see take-home pay reduced - as in most cases end users will not be willing to fund the difference.