Phillip Hammond has announced his budget speech, forecasting the spend to ensure Britain is fit for the future.
Focusing on the budget’s actions related to technological change, Curo Talent’s CEO, Karen Field has commented on what the budget announcement will mean for Britain’s tech sector.
On IR35 reforms, Karen said, “Philip Hammond described the current IR35 legislation as designed for fairness. However, contractors outside of IR35 receive a relatively modest tax advantage compared to their employed counterparts. Arguably contractors sacrifice employment rights and security, paid holidays and sick leave and are required to tackle their own insurances, professional fees and provide their own pension - all this with no guarantee of income.
“Has anyone calculated the loss in taxation if contractors decided to close up shop? IT contractors already pay higher levels of PAYE due to their earnings, and if they operate through a limited company, they are normally VAT registered and pay Corporation Tax.
“Freelance contracting should be encouraged, not discouraged if Britain is to become a technology world-leader post-Brexit. Contractors that are in-demand consistently move from one project to another. The skills that come from working across different sectors and companies add to their value — lessons learned on one project can be quickly applied to another, particularly in areas which are experiencing shortages of skills, such as IT and computing.
“Further consideration should be given to the changing face of the workplace. In the same way businesses gear up to cope with the demands of attracting and retaining a talented workforce in the 21st century, the Government need to realign their 20th-century taxation systems to the needs of the 21st century. Technology is allowing businesses to increasingly connect and collaborate with remote workers, freelancers, and independent professionals; to make this a success it needs Government departments to work with businesses, not against them.
“While it is welcome that the changes to IR35 in the private sector have been pushed back to 2020, the overhead cost for both the hirer and intermediaries in adapting their current business models should not be underestimated. As the new rule will only apply to medium and large firms, an obvious work-around will be to set up small subsidiaries that employ fewer people.
“As we tackle the nation’s productivity challenge, the demand for skilled workers, particularly on new technologies, will always outstrip supply in the fast-moving sectors. While £1.6 billion will support the modern industrial strategy, businesses may need to change their outlook on recruitment, and hire IT contractors on a temporary, rather than permanent basis – especially with post-Brexit uncertainty. This is another reason to not further complicate IR35 legislation.”
On apprenticeships, Karen said, “a reduction in employer contributions from 10 to five per cent for small firm apprenticeships is welcomed, but the Government needs to further invest in Britain’s technology landscape for T-level apprenticeships to be worthwhile. Otherwise, these training schemes will not lead to lifelong careers in the IT industry.”
On the digital services tax, Karen said, “the digital services tax was a large focus, and rightly so. We have an outdated tax system that has never been designed to deal with the digital world. Technology giants will be forced to pay tax on the sales they generate in the UK, under new plans announced in the Budget by 2020. Whether this would be implemented ahead of the OECD global agreement remains to be seen. If Britain takes the lead in this area tech giants with global sales over £500m p.a. will incur a 2 per cent additional tax, which is less than the 3 per cent suggested by the European Community.
“Protecting digital start-ups and growing small or medium tech firms from the tax is the right thing to do, but it will be interesting to see how Donald Trump responds as most of the tech giants in question are based in the USA.”