Finance Bill

Written evidence submitted by Nick Pennington (FB15)

Dear Finance Bill Committee ,

 

(1) I am writing to ask you, to express my deep concern and objection to the ill-considered plans to introduce the damaging Off-Payroll Tax to the private sector.

  

(2) The off-payroll tax means a 14.3% extra cost on UK businesses who rely on contractors, meaning many firms big and small will be affected - which will damage the UK economy. It will also cause huge damage to the UK labour market, some of which has already been realised in the build-up to March 31st March 2020 just before COVID-19 lockdown - whereby thousands(!) of independent contractors terminated (or had terminated) their roles with clients for fear of existing positions being deemed as continuous employment and back dated prior to 31st Match 2020 .

 

(3) The Off-Payroll Tax is in reality a new "double stealth tax" which will slap a huge 14.3% tax on UK businesses. The 'fee-payer' (client or agency) must pay employment taxes on top of the payment made to the contractor. This means an additional tax of employer's National Insurance (NI) (13.8%) and the Apprenticeship Levy (0.5%). This cannot be legally deducted from the current contractually agreed fee with the contractor. Therefore, as things stand, it is a new amount of tax that needs to be paid by the fee-payer, leading to companies saying they will stop using contractors and slashing rates of pay, meaning HMRC will not collect the amount of additional tax they are predicting anyway . In addition:

· The case being made by the Treasury and HMRC on the reasons for bringing in the off-payroll tax are deeply flawed and based on misinformation and misrepresentation.

· The CEST tool created by HMRC has been shown not to work, including in tax tribunals.

· The misguided off-payroll tax will not bring in anything like the amount predicted by HMRC and are unfair to workers who don't enjoy employment benefits, as well as being damaging to firms who use contractors.

(4) On a personal level, I have been in business since November 2001 providing specialist IT development skills on medium to large IT implementation projects in industries such as Water Utilities, Aerospace Manufacturing & Engineering, Food Manufacturing, Chemicals and Pharmaceuticals. As my roles tend to be consulting on implementation projects, the role is temporary for the duration of the project - therefore I am business offering my services to a client, not an employee. The projects can be anywhere in the UK, therefore I have no set place of work and I incur travel & overnight expenses in order to be on a project on a client site. The proposed off-payroll guidelines are misguided and ill conceived, they also put pressure on clients to base decisions of employment status based on potential mitigation of future HMRC scrutiny and penalties against actual consideration by due diligence.

(5) I considered myself lucky leading up to the 31st March 2020, in that my current client took a view that they would execute due diligence and consider the consulting resource of the project accordingly. I did not hear of any other such processes taking place, more of termination and blanket inside IR35 stat us determinations . If my client had blanket deemed roles within IR35, I would have had to pay fuel, hotel fees and evening meals (approx. £1200 per month) out of my net income rather than a business expense.

(6) One of the most unsettling issues that has arisen out of the changes prop o sed in the Finance Bill is that while UK businesses of all industries try to embark on all major types of projects, those projects will still need resource that is not employed by the end client. If a client feels that they can no longer use contractors, they are looking to larger consultancies – who charge higher fees (as much as 3-4 times the daily rates of contractors) for less experienced consultants - many of which are considered off-shore resource . T he net result for the UK business i s that

· they have paid more money, for a lower standard of work, resulting in a long - term higher maintenance cost – therefore the direct opposite of the business case for many IT project to reduce total cost of ownership

· while the HRMC have collected NO INCOME TAX or NI from those off-shore employees and NO CORPORATION TAX from the UK branch of the foreign consultancy because the costs are offset against expenses.

· The Finance Bill is therefore promoting a policy the directly benefits foreign nationals over UK residents and penalising their families and their futures rather than supporting them.

 

(7) We are at a time of great uncertainty, as a nation, as individuals and as families. This is not a time when a section of the economic society should be persecuted but should be encouraged to contribute and fulfil the needs of the wider economy. The human factor in this must also not be ignored as the perpetual stress and strain can lead to mental stress and strains that has have both short and long - term impacts on individuals and their families.

(8) Please support the UK’s flexible workforce and prevent inhibiting the capability of the country to deliver on promises and much needed investment projects for the long - term future of generations to come.

   

 

Yours sincerely ,

Mr Nicholas J Pennington

Managing Director

S.A.P.D. Consulting Ltd.

June 2020

 

Prepared 15th June 2020