A new audit of digital skills in the North suggests that the abolition of tax relief on travel and subsistence (T&S) for IT contracting professionals could exacerbate an already-serious talent shortage.

Nearly two-fifths of digital businesses in the North (37 per cent) have been forced to decline work over the last 12 months as the result of a severe shortage of IT talent, a new skills audit from Northern digital sector trade association Manchester Digital reveals.

One-quarter of the firms surveyed reported that digital skills shortages had forced them to turn down new business worth up to £50,000 over the previous 12 months, damaging their productivity and profitability in the process.

The most difficult digital professionals to source were developers, the audit reveals, with 65 per cent of businesses citing this as their most pressing talent shortage this year, up from 50 per cent last year.

Manchester Digital’s Managing Director Katie Gallagher said that the audit revealed a number of issues the sector was facing year after year, many of which, unsurprisingly, were related to talent shortages. She continued: “While not as many businesses turned down work due to lack of talent last year, 37 per cent still did – a figure that can’t be ignored. The digital industry is booming, but now it’s absolutely critical that we develop and nurture the next generation of talent, in order to support the sheer amount of work our businesses are having to cope with.”

Ms Gallagher did not, however, address an issue that has the potential to worsen the skills shortage these companies are already struggling with. Should proposed changes to tax relief on T&S for temporary contracting professionals proceed as planned on 6th April, many of these professionals will be forced to increase their hourly rates to compensate for a huge cut in income; alternatively, they could stop travelling the lengthy distances to their temporary workplaces that they currently routinely undertake.

As things stand, IT professionals working via Umbrella Companies frequently travel long distances to work – considerably greater than most permanent employees are prepared to travel − whereupon they often undertake business-critical project work.

The government claims that the abolition of T&S tax relief will level the tax playing field between permanent and temporary employees; however, by twisting the rules on SDC (supervision, direction or control) to cover not only actual SDC but also the right to SDC, it will have the opposite effect and hit huge numbers of contracting professionals who were considered independent professionals prior to the Finance Bill 2016.

Many will no longer be prepared to travel long distances to workplaces, which can only exacerbate already-severe talent shortages.

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