The 2011 Budget brought contractors a mixed bag with no end to IR35, but tax breaks and the regionalisation of IT lift the spirits.
IR35 disappointment
Contrary to the hopes of the IT contracting community, the chancellor decided to keep IR35 in its current form because abolishing it would put tax revenues at risk. So-called improvements include an IR35 helpline, staffed by HMRC specialists on the legislation, and an IR35 Forum.
The Recruitment and Employment Confederation (REC) expressed disappointment: "The outcome was a recommendation to suspend IR35, giving immediate simplification to the system, whilst wider-ranging reforms were developed. We are disappointed that the Chancellor rejected this out of hand," said head of public policy, Gillian Econopouly.
Compliance offset
Potential cuts in public and private sectors could be offset by the need for organisations to skill up to comply with regulations, reckons Adam Sztuka, managing director at Clarity Resourcing.
“Today's budget are unlikely to have a major impact on many IT and business projects, because those organisations still face regulatory compliance”.
If anything, forced cuts may result in fewer permanent positions and a greater demand for contractors to plug the resource gap. There's already a Europe-wide mismatch for the supply and demand of these skills. Many financial service organisations have already turned to specialist contractors in order to meet the various regulatory deadlines such as those for Solvency II, and that looks set to continue for quite some time."
Enterprise boost
The announcement of 21 Enterprise Zones with free, super-fast broadband is welcomed as a stimulus to IT contractors located outside London. But socitm, the local government association, berated the lack of incentives in the Budget for home and flexible working. Measures could have assisted not only contractors, but the public sector, too, in achieving a lower carbon footprint.
A 2% reduction in corporation tax could usher in better times for contractors by freeing up cash flow and enabling companies to invest in their IT infrastructure once more. This could work well for freelancers, says Neil Hedges, senior manager, Robert Half Technology. “Highly skilled professionals are required to help manage growth initiatives and get key projects back on track.”
Budget wins
According to John Brazier, managing director of freelance group, the UK PCG:
• The 1% reduction in corporation tax for nanobusinesses will help those contractors to re-invest, increasing their capabilities and output.
• Reduction in fuel duty and the implementation of a new stabiliser together are a big boost for freelancers who work for multiple clients multiple locations.
• The creation of 10 Enterprise Zones with bundled of benefits of 100% rate reliefs, simpler planning rules and superfast broadband should aid freelancers. Benefits include the regionalisation of the freelance talent pool from the traditional heartlands around London.
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