The Chancellor of the Exchequer, Phillip Hammond, has come under renewed fire from a leading contractor tax advisory for his recent U-turn on earlier plans to abolish class 2 National Insurance Contributions (NICs), with warnings that his beleaguered Government’s treatment of Britain’s self-employed will drive many of them away at the next General Election.
Qdos Contractor blogger Benedict Smith effectively charges the Government not only with a lack of regard bordering on cynicism for Britain’s growing army of independent contracting professionals and self-employed freelancers, but with muddled thinking and on-the-hoof improvisations instead of clear strategy.
Mr Hammond was dramatically forced to back down on a pledge in his first budget to raise Class 4 NICs less than a week after he’d announced it, so his second U-turn on class 2 NICs, which would have saved 3 million self-employed people approximately £150 a year, is hardly an uncharacteristic development. For Smith, both indicate a worrying lack of clarity about Government thinking towards the independent workforce and raise serious questions about how coherent and thought through its tax strategy is.
Class 2 NICs don’t actually apply to contracting professionals operating through their own personal service companies, but the decision, Smith believes, is likely to be seen by most freelancers as another confidence-zapping indicator that the Conservatives are not to be trusted on tax and will resort to anything to extract tax revenues from them, including obstinately advancing with its plans to impose unpopular and destructive IR35 reforms on the private sector.
When the U-turn was revealed earlier this month, the CEO of umbrella company trade association the Freelancer and Contractor Services Association (FCSA), Julia Kermode, accused the Chancellor of yet again penalising hard-working self-employed people who were “the backbone of the UK economy”. She called for the Government to commit to a more holistic approach to tax policy rather than continuing with “knee-jerk reactions to act as sticking plasters on a broken system”.
Smith notes that the Government’s apparent muddle over its own tax roadmap does not bode well at a time when private sector firms need clarity over the impact of prospective IR35 changes.
Noting that contractors have shown in survey after survey that they believe they bear the brunt of the Government’s dubious tax strategy and broken promises and think they are being used by HMRC as cash cows, Smith writes: “There is a credibility problem to say the very least: can independent workers and small business owners trust what the Government says and does anymore? After a number of empty pledges and most recently, another tax U-turn, it’s difficult to see how they can.”