As you'll likely know by now, on Wednesday the 11th March Rishi Sunak delivered the Budget 2020. This particular budget had many firsts; it was Sunak's first as Chancellor of the Exchequer, the first since October 2018 and the first since the UK left the EU.
Whilst the Coronavirus (COVID-19) crisis dominated the speech, with the chancellor revealing a £12bn package to combat the impacts of the virus, there were many key points that recruitment agencies should be aware of.
The budget was preceded by an announcement from the Governor of the Bank of England, Mark Carney, delivering an immediate emergency cut in interest rates from 0.75% to 0.25%, taking borrowing costs to the lowest level in history. This co-ordinated action on Budget day was designed to have "maximum impact" to stimulate the economy in light of the adverse impact of the Coronavirus on global markets.
- As part of the governments package to combat Coronavirus the chancellor confirmed changes to Statutory Sick Pay (SSP).
- Those self-isolating will be paid SSP from the first day of sickness rather than the fourth day.
- Small businesses with fewer than 250 employees will be able to reclaim the cost of SSP relating to COVID-19 from the government.
- Those ineligible for SSP, for example the self-employed or those earning below £118 per week will be able to claim Employment and Support Allowance from day one rather than day 8.
Parasol, as an employer, has always paid Statutory Sick Pay and will apply the new government guidance to our contractor employees. If you employ any contractors directly you will need to apply these new rules. If you have less than 250 employees, you may be able to reclaim this cost.
We would like to reassure you that Parasol have robust business continuity plans in place to ensure that we will be able to continue to make sure your contractors are paid on time. Whilst no one at this stage can predict the precise impact of COVID-19, we are confident that our contingency planning will mean that our service will continue with minimal disruption.
Other key points from the budget include:
Somewhat surprisingly the off-payroll reforms were not referenced in the budget speech at all. This was disappointing given the far-reaching impact of the reforms on business and the contracting community. The ‘Red Book’ published after the budget did confirm that the off-payroll reforms will be going ahead as planned on 6th April 2020*, meaning that those businesses hoping for a last-minute reprieve will be left disappointed.
Leading up to the budget many commentators speculated that Entrepreneurs Relief would be abolished entirely. Contractors across the country breathed a collective sigh of relief when Mr Sunak stopped short of this. The chancellor did however announce a reduction to the lifetime limit on gains eligible for relief from £10 million to £1 million with immediate effect. This will have little impact on the majority of PSC contractors, as the gain on liquidation falls well below £1 million in the vast majority of cases.
Tax avoidance measures
The Red Book also included promises to crack down on the promoters of tax avoidance schemes. This is a welcome move. We have repeatedly raised concerns that the off-payroll reforms could mean that contractors previously operating through their own limited company would unintentionally get caught up in tax avoidance schemes. The aggressive targeting of contractors by these scheme promoters must stop. Any move from the government to crack down on non-compliant umbrella companies is welcomed by Parasol and good news for the recruitment industry.
If you have any questions following the budget, or want further clarification of what any of it means to you and your agency, please do not hesitate to get in touch with your account manager. Alternatively, we recorded a special Budget 2020 edition of our Under The Umbrella podcast which you can listen to by clicking the button below:
* Update: at the time this article was written, the off-payroll (IR35) reforms were due to be implemented on the 6th April 2020. On the 17th March 2020, the UK government announced that it would be deferring the reforms to the 6th April 2021 to help businesses and individuals during the COVID-19 crisis.