The chancellor did an about-face on controversial tax credit cuts, but showed no intention of reversing plans to eliminate tax breaks on travel and living expenses for freelance workers.
What this likely means is a pay cut next year for any construction workers who are completely self-employed or technically working for umbrella companies.
Research undertaken by Danbro, a well-known umbrella firm, hints that when tax relief is stopped in April 2016, freelance workers could face an average loss of £200 a week .
Damian Broughton, Danbro managing director, said that the chancellor began by confirming that this budget would provide competitive taxes, which is what businesses need. The reality is that a stealth tax is taking money from contractors and businesses alike.
Mr Broughton indicated that the move could have a potentially catastrophic event on certain categories of business that need freelance workers to provide needed skills. If these businesses want contractors to come to their job site, they will have to pay a lot extra and many don’t have the resources to do that.
He said that the chancellor also applauded the growth that the UK economy has experienced in recent years. This growth was driven by the availability of a flexible workforce, and now the workers are prevented from travelling to where they’re needed, putting the brakes on an important sector.
The decision to place restriction on tax relief for travel and living expenses for workers who are hired through an intermediary, such as a personal service company or umbrella company, will raise only £265m for the Treasury, the Danbro representative added.
Mr Broughton said that while last fall’s statement was good news for contractors in terms of several planned building and infrastructure projects, the “short-sighted tax grab” announced by the chancellor will deliver a severe blow to the temporary worker sector.
He refuted the chancellor’s claim that “we are the builders” by pointing out that without a strong and versatile workforce, no one will be able to build anything at all.
Controversy can create unexpected alliances: construction union Ucatt has been campaigning vigorously against umbrella companies for the fees that they impose on workers, but is in complete agreement with Mr Broughton on this subject.