The first Autumn budget for twenty-one years was not the happy occasion most had wished for. The Liberty Bishop team have gone through the Chancellor’s statement with a fine tooth-comb and picked out the highlights just for you! Here are our takeaways from a bit of a gloomy budget:
- Personal allowances rose (great news), but only a little;
- Extra money will be provided to HMRC to investigate and prosecute tax avoidance and evading (good news for compliant companies such as Liberty Bishop!).
And the predictions for economic growth weren’t as buoyant as most expected, but the Chancellor seems to have acknowledged this and measures are to be implemented to face the realities of our economic future.
Philip Hammond also stated his intention to end London’s reign over the economy, with promises of investment in the Midlands and North, including a £1.7 billion fund for local metropolitan transport upgrades.
The more important details for the contracting world are:
Compulsory VAT registration has been frozen at the current threshold whilst under consultation. Problems arising from lowering the threshold at this time were recognised by the Chancellor and so keeping it at £85,000 will be a relief to many contractors and freelancers.
The Technology Sector
Philip Hammond acknowledged the importance of the future of the technology sector and is funding from the bottom up. Education will see a £100 million investment to train 8,000 new computer science teachers, bridging the current and significant skills gap in the UK. This is aimed to support and grow the burgeoning artificial intelligence industry by providing homegrown talent. For many years the UK has been heavily reliant on non-UK talent (remember, Brexit is also looming). A new National Centre for Computing will be established to be the backbone of the investment into computer science education and training.
The freeze in the corporation tax indexation allowance on chargeable gains within a company will be a minor comfort for the UK’s small businesses, but this pales into insignificance when compared to the £170 billion retained by the UK’s SMEs as they wait to see the direction of our uncertain economic future.
No decision was made on extending current IR35 regulations to the private sector (the Chancellor is taking the decision under consultation). The issues with the public sector only hint to what might lie ahead, however, the government has said it will take into consideration the experience of the IR35 reforms in the public sector. Contractors who operate a personal service company (PCS) will most likely have to wait until late 2018 before the consultation has drawn to a close before they find out if the rules will be implemented in the private sector (most likely in April 2019). The wording fo the budget states:
“Off-payroll working in the private sector – The government reformed the off-payroll working rules (known as IR35) for engagements in the public sector in April 2017. Early indications are that public sector compliance is increasing as a result, and therefore a possible next step would be to extend the reforms to the private sector, to ensure individuals who effectively work as employees are taxed as employees even if they choose to structure their work through a company. It is right that the government take account of the needs of businesses and individuals who would implement any change. Therefore the government will carefully consult on how to tackle non-compliance in the private sector, drawing on the experience of the public sector reforms, including through external research already commissioned by the government and due to be published in 2018.
HMRC have made indications they would like to clarify the rules around claiming tax relief on travel and subsistence. It is expected that HMRC will strengthen the current stance and further narrow the opportunity for umbrella companies to facilitate tax relief on expenses.