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Recrutiment & Employment Confederation
Policy

What You Need to Know About Budget 2016

Government and campaigns

Femi Ogunbiyi avatar

Written by Femi Ogunbiyi

With the EU Referendum looming large, you’d be forgiven for thinking this Budget would be a quiet affair. However, in 9,223 words, the Chancellor put paid to any such notion with a rich mix of measures designed to support businesses, workers and the self-employed. Here’s a summary of the key things you need to know.

IR35: Caps on public sector contractors

As expected, the Chancellor used the Budget to target public sector contractors in order to hit his fiscal targets. From 2017, liability for determining whether a contractor falls within IR35 will transfer from their limited company (e.g. Personal Service Company) to the engaging public sector organisation. However, this could fall on recruitment agencies where they are first to engage the contractor. The government is expected to consult on this and we will be responding accordingly. We urge HMRC to work with our industry to create a level playing field and ensure that those who choose to work flexibly are not discouraged from doing so.

A boost for the self-employed

The self-employed received some good news with the announcement that their Class 2 National Insurance Contributions (NICs) will be abolished. Coupled with an increase in personal allowance, these measures rightly recognise and support UK workers, particularly the self-employed who play an increasingly important role in the UK jobs market.

Tax: A road to a brighter future?

There was a medley of tax measures this afternoon, as the Chancellor unveiled a new ‘Business Tax Roadmap’ to provide businesses with greater clarity over the course of the parliament. Specifically:

  • 600,000 businesses will pay no business rates at all while a further 250,000 will pay a lower rate
  • Corporation Tax will be reduced to 17% from 2020
  • Termination Payments over £30,000 will be subject to NICs and Income Tax

While the fall in business rates and Corporation Tax is a positive step along this road, taxing termination payments could cost businesses productivity at a time when they are already flatlining.

Education and Disability Employment Reform

From a sector perspective, the biggest talking point was education and the Chancellor wasted no time in confirming that all UK state schools will become academies by 2020, giving schools control over their finances. While we welcome the measure, it is important that it is accompanied by an investment in recruitment and retention of the teacher workforce.

Finally the government will provide more support for disabled people helping to secure employment. We know that jobs transform lives which is why we encourage measures which help people succeed through work. The REC has a partnership agreement with DWP supporting their Disability Confident Initiative and our members play a vital role in helping those furthest from the jobs market.

On balance, this Budget served the self-employed well, but recruiters are likely to be concerned about their tax responsibilities arising from the intermediaries’ reform. The substance of the Chancellor’s Business Tax Roadmap will be greeted with much acclaim by businesses. However, the government’s ambitious plan for infrastructure projects such as CrossRail 2 and HS3 will fall flat without investment in the construction and engineering skills needed to see them succeed.