The controversial Off-Payroll Tax will be extended to the private sector on 6 April 2020, Chancellor of the Exchequer Rishi Sunak announced this afternoon during the 2020 Budget.
The announcement confirms plans set out by the Treasury in its recent Off-Payroll review, with the red book reading: ‘The government has recently concluded a review of the reform and is making a number of changes to support its smooth and successful implementation. The government believes it is right to address the fundamental unfairness of the non-compliance with the existing rules, and the reform will therefore be legislated in Finance Bill 2020 and implemented on 6 April 2020.’
The timing of the announcement is particularly controversial, coming despite widespread calls for a rethink or a delay to the changes, and with the House of Lords Finance Bill Sub-Committee yet to conclude its inquiry into the proposals. Over recent weeks, multiple recent committee hearings having yielded evidence of extensive damage to industry caused by the legislation, as well as rife non-compliance amongst hiring firms and their supply chain partners.
The confirmation of the news also comes alongside pledges for financial support for the NHS, and substantial investment in construction and transport initiatives that will inevitably suffer from the fallout from the Off-Payroll Tax.
Budget reaction: ‘Tin-eared approach will cause irreparable damage’
“Today’s news is exceptionally disappointing and shows that a tin-eared approach by the Chancellor,” says ContractorCalculator CEO Dave Chaplin, who points towards a recent ContractorCalculator survey in which 12,000+ contractors indicated that 52% of firms are losing at least 50% of their contracting workforce due to the Off-Payroll Tax.
“Contractors are abandoning their clients and UK plc is set to suffer irreparable damage. The Conservative Party allegedly supports small business but with the introduction of this toxic tax the Government will irreparably damage the self-employed sector. Already we are seeing firms unfairly classifying self-employed workers as ‘deemed employees’, meaning they are taxed as employees, yet receive none of the rights of employment.”
Chaplin adds: “A much simpler Off-Payroll Tax of circa 5%, without the need for a complex employment status test, is the obvious choice, but this suggestion has fallen on deaf ears once again. Havoc will ensue. Mr Johnson and Mr Sunak will go down as the pair that introduced the ‘no rights employment’ model and damaged the flexible workforce.”