Was the 2016/17 Budget a setback for the Recruitment and Umbrella sectors?
Naturally we were disappointed that the chancellor further increased Insurance Premium Tax (IPT) from 9.5% to 10% in yesterday’s budget.
Richard Bell, Managing Director of Kingsbridge Insurance Brokers said:
The IPT increase, taking effect on 1 October this year is likely to further squeeze insurance providers and unarguably increases the cost of doing business for UK companies. We remain committed to providing the best possible value without compromising on cover and will continue to work with our insurance partners to reduce the cost of business insurance for our clients.
With this latest change coming so soon after a large increase in November 15 it feels a little short-sighted on the part of the Chancellor. It is pleasing to see that this latest increase will be used to fund and support greater flood defences for the country and those affected by significant flooding in the past few years.
Off-payroll working in the public sector is also subject to reform in a move that has been heavily rumoured in the recruitment and umbrella industry for some time and, while the reform is not as extensive as some had feared, these public sector contractors do represent a significant percentage of the UK contracting community.
Chris Bryce, Chief Executive of IPSE (The association of Independent Professionals and the Self-Employed) commented:
The Chancellor announced a number of measures today which are likely to impact independent professionals and the self-employed. His move to extend rules for off-payroll working in the public sector will create confusion and disruption. The engaging department or agency will be made responsible for any tax liability. This will result in genuine businesses having to jump through numerous hoops and will see the cost of engaging contractors increase. It will endanger the delivery of vital public services and important projects like HS2.
The reforms to tax relief on travel and subsistence expenses for workers engaged through employment intermediaries (such as umbrella companies) which were announced in the 2015 Autumn Statement also take effect from 6 April this year. Coupled with the reforms announced yesterday, these measures are set to significantly impact the recruitment and umbrella companies who serve the contracting community.
Whether they choose to operate through their own limited companies or employment intermediaries the industry is set to respond with more flexible options for independent workers. Kingsbridge will continue to support our umbrella and recruitment clients with insurance solutions designed to complement the range of services available.
Other measures announced were largely positive.
The headline being a reduction in corporation tax currently 20% to fall to 17% by 2020. Over 600,000 smaller businesses will also become exempt from business rates altogether when the annual thresholds rise from £6,000 to £12,000 for small firms and £18,000 to £51,000 for larger employers.
The continued freeze on fuel duty will also be a welcome announcement for large and small businesses alike. Our recruitment and contractor clients were particularly pleased at the announcement which undoubtedly has a positive impact on the cost of running a business.
The struggling North Sea Oil and Gas industry also saw some positive news with the controversial petroleum revenue tax being ‘effectively abolished’ and the supplementary charge for oil companies being halved from 20% to 10%, backdated to 1 January.
In summary, the budget was a rather ‘mixed bag’ with smaller businesses seeming to be the biggest winners. The chancellor did however, present a ‘bleak’ picture of the global economy with UK growth forecasts revised down, further spending cuts and debt and borrowing targets and projections all revised. With many of his new measures yet to be clarified, an uncertain European future and turbulent global market, UK industry will be watching the treasury closely over the coming months (and years) to judge for itself the true impact.