Lord Palmer of Childs Hill has appealed to the Government to rethink its plans announced in the March 2015 Finance Bill and repeal Sections 289A that will prevent contractors and freelancers from claiming legitimate tax relief at source. The clause was added without consultation and enacted two days after the addition was made without notifying the umbrella company sector.
The appeal came in a speech made by Lord Palmer in the House of Lords on Tuesday evening (10/11/2015, 6.03pm) when he alerted the House to the damaging effect the legislation will have, quoting the Freelancer & Contractors Services Association’s (FCSA) calculations that the impact will be financially greater for many families than the loss of tax credits.
Lord Palmer reminded the House that some 400,000 contractors will be affected by the legislation; at present the tax relief is given at source, but under the new Finance Law will now have to be claimed at the end of the tax year. He reiterated that many contractors will fail to make a claim at all and many will need to employ an accountant, notwithstanding the impact it will have on an already under-resourced HMRC office that will need to process an additional 400,000 tax returns.
Lord Palmer went on to remind the House and Government that “umbrella companies are a critical element in supporting the UK’s flexible workforce, offering workers the platform to work without the worry of running their own companies while offering employers, directly or through an agency, the flexible workforce they require.”
Commenting on Lord Palmer’s call to repeal S289A or, at least, to insert a new clause to delay its implementation for 12 months to enable a full consultation to take place, Julia Kermode, CEO of the FCSA said: “Lord Palmer’s message was music to our ears. The FCSA has been campaigning for this specific amendment to the Finance Bill since March and I am pleased that Parliament is beginning to hear us at last. Lord Palmer clearly understands just how damaging such legislation will have, not just for umbrella employers and contractors but on the UK economy as a whole. I would urge the Government to listen to Lord Palmer’s appeal to repeal Section 289A of the March Finance Act and allow a full and proper consultation to take place. We did not have the opportunity back in March to make our case as the amendment was added and enacted within two days.
“The new law would put the whole industry at risk and I am pleased that we are seeing a shift in support of contractors and the UK’s flexible workforce. Lord Palmer’s speech is one of the many positive signs that the FCSA has seen in recent weeks and it seems that MP and Peers from all parties are taking heed of our concerns and raising them with the Government. I hope Ministers will pay attention and I look forward to continuing our discussions with policy makers over the coming months.”