Budget: Businesses fear tax changes for self-employed

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Changes to IR35 expected in the Autumn Budget could result in increased prices, warns the REC

More than half (53%) of employers would have to take action if the Budget introduced measures that would increase staff costs through changes to taxation laws, according to a report from the Recruitment & Employment Confederation (REC).

The JobsOutlook survey asked 200 employers how they would react to potential additional costs introduced in today’s Budget. It found that a third (30%) would have to increase their prices if there were changes to taxation, such as applying IR35 to the private sector.

IR35 is designed to stop tax avoidance and applies when workers supplying their services to clients via an intermediary, such as a limited company, would be an employee if they were not using the intermediary. Such workers have to pay Income Tax and National Insurance Contributions just the same as employed people.

Currently IR35 applies to the public sector, but today's Budget may see it extended. This would mean the responsibility for determining the employment status of contractors falls on the private sector companies who engage them.

REC chief executive Kevin Green described the results of the survey as “concerning”.

“Businesses do not want any change to taxation in today’s Budget, which would create more difficulty in attracting and retaining talent,” he said. “The fact that more than half of employers would have to react if they face increased costs is very concerning. We demand that the chancellor does not make a difficult situation even worse for employers.”

The larger JobsOutlook report surveyed 600 employers, and found that 80% believed they have no or just a little spare capacity in their organisation to take on more work without new staff.

A fifth (22%) of employers polled said that they still plan to hire additional permanent staff in the next four to 12 months. This is despite 33% feeling economic conditions are worsening, compared to just 26% who feel they are improving.

“At the moment businesses are still planning to hire – something that is not very easy as the pool of available workers is shrinking,” added Green. “We hope that today will not add another burden to their plans. We don’t know how Brexit negotiations will move forward and what this will mean for EU workers here and for UK trade. Bearing this in mind, it is not surprising that a higher number of UK employers still think that the UK economy is deteriorating rather than improving.”

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