Will the Government Force Contractors onto Payroll after a Month?

In the last few weeks there have been reported plans to put contractors and limited companies on a company payroll if they end up contracting for them for more than one month. The clause could be unveiled next week when George Osbourne delivers the 2015 Autumn Statement which could potentially affect the future of contractors and limited companies throughout the UK.

There were recent reports from The Daily Mail and Guardian newspaper that the government intend to introduce the 'one-month-then-payroll' system that has been viewed as a clampdown on an apparent tax loophole exploited by contractors. This decision could affect up to 90% of contractors resulting in a reduced take home pay and deductions that could raise £400m in taxes for the treasury. The Freelancer & Contractor Services Association (FSCA) believe the clause will be challenged by a number of politicians if unveiled next week.

“There are some 4.6m self-employed workers in the UK who will have to go on the payroll of each of the clients they work for after a month if this legislation comes into force,” Said Julia Kermode, chair of the FSCA.

There is a huge amount of business opposition to these ‘alleged’ proposals as contracting is such an essential part of the UK economy – giving flexibility to workers and employers especially when it comes to short term projects.  Any proposed changes could impact the dynamic nature of the IT market in the UK – in both the public and the private sector. This could affect the long term growth of the UK’s digital economy. 

The decision could potentially be unveiled on Wednesday November 25th in the Autumn Statement which could ultimately decide what the future of contracting has in store for the UK.

“HMRC doesn’t seem to appreciate that contractors are a hugely important part of the UK’s workforce and the majority who work this way are not trying to game the system. Many provide businesses with specialist skills and allow access to these skills in a flexible way, helping those businesses to grow” according to Chris Futcher of Pulse Accounting. 

Have your say on this matter on the ContractorUK Forum.