Wednesday, 1 March 2017

This Lady’s not for turning?

The words of a certain prime minister echoed in the BattleAxe’s ears as she was urging No 10’s current occupant to ignore that quote and see sense on draconian media fuelled tax decisions.

Mrs May was clearly listening. She promptly ordered a U turn on the rise in National Insurance for the Self Employed announced by her next door Hamster in the Budget.  An increase he “justified” on the basis it wasn’t fair that the self-employed paid less than employees. However, he forgot that the self-employed don’t get statutory sick pay; have no right to paid holidays; don’t get pension contributions (because there is no such thing as Auto-Enrolment for the self-employed) nor lots of other benefits of employee status.  Their lower rate of NICs has always been a means of putting a little bit more away each month towards exactly those insurances and pensions.  Thankfully Mrs May helped Spreadsheet Phil “review” the idea and the concept disappeared – the BattleAxe having already offered a rolling pin to knock some sense into the Chancellor.

A slightly less vigorous deviation is on the Making Tax Digital strategy where businesses will need to file accounting data with HMRC more than once a year.  Given the state of HMRC’s existing systems and their proven inability to maintain accurate records, news of a further year’s delay gave rise to a huge collective sigh of relief within BattleAxe HQ.

Then there’s the new rules on how freelancers working for public authorities through limited companies are taxed. Another knee-jerk reaction to the media whipping up misunderstanding.  A few cases of abuse mean all freelancers working for the NHS, government departments and local authorities will potentially be penalised.  Historically the tax payers made the decision on whether they were really employees and it was their risk if they got it wrong!  Now it’s the public bodies’ decision and risk. So, what odds they won’t err on the side of caution and misclassify even genuine client/supplier relationships?

No sign of an Exchequer U Turn on this – yet! But there are many freelancers – including locum doctors and nurses who keep the NHS going – who are taking to the exit ramps and accelerating away from the public sector and, in some cases, the UK. Those staying are demanding higher daily rates to compensate for the new tax. So any potential extra tax being collected (the BattleAxe isn’t convinced it will be any) may well be outweighed by the additional costs of keeping the public sector running.  Hold on: that could explain the delay on Making Tax Digital – maybe HMRC can’t afford the staff to implement it! The BattleAxe will make doubly sure she doesn’t fall off her bike at the next triathlon in case there’s no-one in A&E to patch her up.

So, Mrs M, ignore Mrs T: U Turns aren’t always a bad thing!  Better still make sure the Cabinet engage brain before making announcements – the BattleAxe can help with the thinking process… on a freelance basis, of course.

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