Key announcements impacting contractors in Autumn Statement

Key announcements impacting contractors from today’s Autumn Statement and Spending Review 2015:

Travel and Subsistence

Employment intermediaries and tax relief for travel and subsistence:

As confirmed at Summer Budget 2015, the government will legislate to restrict tax relief for travel and subsistence expenses for workers engaged through an employment intermediary, such as an umbrella company or a personal service company. Following consultation, relief will be restricted for individuals working through personal service companies where the intermediaries legislation applies. This change will take effect from 6 April 2016.

The text is at chapter 3.20 in the Blue Book.

We will await the detail of the changes in the draft legislation which will be published on the 9th December. We have a good indication of what the legislation might look like based on a recent consultation document issued. This could result in the removal of tax relief and therefore a reduction in take home pay for umbrella workers and those working through PSC’s (if caught by IR35). For those PSCs working outside IR35 and paying themselves dividends, there should be no change.

Intermediaries legislation – IR35

No mention was made of IR35 in the Chancellor’s speech, including rumours in the press that contractors could be forced onto the payroll after one month on contract. However, the government announced at the Summer Budget that HMRC would engage with stakeholders over the summer about the best way to reform the intermediaries legislation (IR35). A discussion document was published on 17 July and HMRC received over 160 written responses in addition to 14 roundtables with stakeholders. The government’s objective as set out in the discussion document is to find a solution that protects the Exchequer and improves fairness in the system without creating disproportionate burdens on business, or widening the scope of the rules. The government is considering responses to the discussion document, so we will have to watch this space closely for any further announcements.

Tax evasion

The Spending Review also said the Government intends to:

take action against those who have used or continue to use disguised remuneration schemes and who have not yet paid their fair share of tax. The government will also consider legislating in a future Finance Bill to close down any further new schemes intended to avoid tax on earned income, where necessary, with effect from 25 November 2015.

Key points in today’s announcement:

  • Legislate to restrict tax relief for travel and subsistence expenses for workers engaged through an employment intermediary, such as an umbrella company or a personal service company.
  • Restrict relief for individuals working through personal service companies where the intermediaries legislation applies. This change will take effect from 6 April 2016.
  • Take action against those who have used or continue to use disguised remuneration schemes and who have not yet paid their fair share of tax. The government will also consider legislating in a future Finance Bill to close down any further new schemes intended to avoid tax on earned income, where necessary, with effect from 25 November 2015
  • £717 million of sustainable resource savings a year by 2019-20, achieving £1.9 billion cumulative savings over the Spending Review period, representing a headline 21% reduction in baseline resource costs, delivered through digitisation of tax collection and a smaller but more highly skilled workforce
  • £1.3 billion reinvested to transform HMRC into one of the most digitally advanced tax administrations in the world, with access to digital tax accounts for all small businesses and individuals by 2016-17, delivering an additional £1 billion of tax revenue by 2020-21 and sustainable efficiencies
  • £800 million confirmed funding for additional work to tackle evasion and noncompliance in the tax system, delivering an additional £7.2 billion over the next 5 years
  • £400 million total reduction in business customer costs by 2019-20
  • Continue to tackle fraud and error in the tax credits system and will work with debt collection agencies to collect £324 million of tax credit debts owed by 2019-20

The Chancellor’s full speech can be found here.

For your reference the full Spending Review and Autumn Statement document can be found here and the Government’s main announcements here.

If you would like any further information our team are on hand to talk through any of these points on 0207 148 1580.

Published on: 25 November 2015 - By: First Freelance

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