Self-employed could come under fire in Budget

Paul Falvey, tax partner at BDO, is the latest to share his thoughts on the Autumn Budget that will be taking place on Monday 29 October.

Similarly to George Bull from RSM UK’s provided insight, Falvey has highlighted how the government’s attention has turned to large technology companies, and this will most likely be a change to be included in the Budget.

Falvey said: “Imposing major new taxes on digital giants this side of Brexit looks risky – why frighten away global businesses now? Hammond may try to sound tough – and his recent pronouncements have been in this vein – but he will probably only make small changes before the OECD finalises new global standards.”

Nonetheless, targeting the digital industry is certainly a lucrative way in which the government may increase their revenue, whilst managing to simultaneously avoid increasing taxes in areas that have already been subject to regulations.

Paul Falvey continued: “The EU parliament’s economic and monetary affairs committee has also suggested that the rate levied on digital companies should be increased from the proposed 3% to 5%. There is growing political momentum behind this measure. This does not necessarily lead to good policy making, but we should look out for an interim step of introducing withholding tax on royalties (probably at a low rate), which may allow him to grab some headlines.”

With such strong political pressure in this area, then, it seems that increased taxing will be considered by the government as a necessity for the Autumn Budget.

A topic which Paul Falvey believes has been a huge point of contention in the economy – one which has not been effectively dealt with – is that of employment status and the gig economy in 2018.

“Since IR35 was introduced in April 2000, it has become clear that it did not resolve the long running employment status issues – it just made things worse,” Falvey has argued.

The accounting industry – including BDO’s Paul Falvey – are not the only ones who are concerned. The Association of Independent Professionals and Self Employed (IPSE) recently released a statement by the deputy director of policy, Andy Chamberlain.

Chamberlain described IR35 as “an extraordinary myopic policy” as it is a “short-sighted tax grab that will cause untold economic damage in the long-term.”

He goes on to add that “[the chancellor] will be flying in the face of the very businesses he pledged to support. Rather than properly taxing large multinational companies, the government is loading the gun against the self-employed. It has already wreaked havoc in the public sector, with project delays and skills shortages.

“The UK is staring into a Brexit-shaped abyss, yet the government wants to introduce a measure which will damage the country’s greatest competitive advantage – our flexible economy. And now they want to bring businesses down with them, by smothering them with increased regulation.”

There is a widespread acceptance and understanding that the UK’s tax and legal rules are overly complex and continue to become even more so. Paul Falvey has stated that he would prefer to see a simplification of the current legislations.

Falvey outlined how “most businesses and their advisors would welcome the government properly addressing the alignment of income tax and NIC rules, clarifying who should and should not be treated as an employee and what their legal rights should be. Even though some people may lose out, simplifying these rules is likely to be better for the economy in the long run.”

He concluded: “I hope the chancellor can find the courage and time to grasp this nettle.”