IR35: Taxman gets the sums wrong …again!!!
The Treasury are in danger of being very short sighted as to the impact of ‘tax on jobs’. In gaining £125m the risk is a loss of £400m – can the public sector not afford calculators???
Months of protest against a ‘tax on jobs’ in key sectors which use temporary staff have been reluctantly abandoned after the government said it would introduce it next month.
Recruiters for banks, insurers and healthcare outfits were told the concession allowing them to charge VAT on just their fee, rather than temps’ fees as well, will be withdrawn on April 1st.
For applying to firms whose tax status stops them from fully recovering VAT costs, the new requirement to pay VAT on the total cost of a temp may hit up to 150,000 roles.
The Recruitment and Employment Confederation, which issued the figure, warned the Treasury that its members were terminating temporary work contracts to head off heftier VAT bills.
“The matter was being considered…[but] we were told on Thursday that they were going ahead with withdrawing the concession,” Anne Fairweather, REC’s public policy head, told CUK.
“At this stage all we can do is continue to speak to our members and help them measure the impact as and when April 1st comes, which is now not very far off.”
The withdrawal of the VAT concession on temps will not affect umbrella or limited company workers, as the temp must have been directly employed for it to be in operation.
As a result, the impact on the temporary IT workforce should be “fairly limited,” Ms Fairweather hoped, yet there will still be “some IT workers caught up in the terminations.”
The REC explained that the Treasury, which expects to raise £125m a year from the change, has underestimated the impact of the “tax on jobs” which it believes would cost £400m.
“Clients are reviewing their whole workforce at the moment, and our point…[was] that it is not really the best time to add to their costs,” Ms Fairweather said.
“150,000 estimated jobs currently benefit from the concession, so some of these may go, and some may just be employed at a higher cost” from next month.
The Treasury is said to dispute the number of temporary workers who stand to be affected, but in their talks with opposing parties its officials declined to provide an alternative.
Joined by the CBI, the employers’ group, the REC had called officials to defer the tax change until 2011, but yesterday expressed “dismay” to learn their appeal had been rejected.
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Tags: AWD & IR35, contractor legislation changes, taxman & contractor ir35 hearing
