Britain’s army of freelance workers awaited Chancellor George Osborne’s Autumn Statement with baited breath but, in reality, few fears were realised and little was done to clear the confusion surrounding the sector in a disappointing spending review.
Despite lobbying by Danbro, Gabem’s parent company, to halt plans to restrict relief on travel and subsistence claims, he has pushed ahead with his plans and that will be a bitter blow for contractors and British industry alike, despite claims by the Chancellor that this budget would “deliver what businesses need”.
The Autumn Statement also did little to clear confusion around the use of intermediaries and how new travel and subsistence regulations will be implemented. Rumours about contractors being forced onto the payroll if they work with an employer for more than a month were completely ignored by the Chancellor.
However, the spending review also had some good news for contractors. Thousands of freelance opportunities could be on the horizon thanks to a raft of infrastructure and building projects and plans to create a fully digital tax system will help to streamline contact with the HMRC.
Here we highlight the key announcements and what they mean for contractors.
Tax relief restricted on travel and subsistence claims
Despite not mentioning it in the budget, detailed plans released after the Chancellor’s speech confirmed tax relief on travel and subsistence expenses will be restricted from 6th April 2016. Workers engaged through an employment intermediary, such as an umbrella company or a personal service company, will be affected.
This move will hit contractors directly in the pocket and many could lose as much as £200 a week. Businesses will have to make up the shortfall if they want to retain freelance skills and it could have a big impact on the sector and the economy.
The good news is that contractors don’t have to do anything now. Details of how this new “stealth tax” will be implemented should be released around December 9 and Danbro will be providing advice and support when we know more.
IR35 was not even mentioned in the Autumn Statement document so nobody is any clearer on how this will impact contractors in the future.
However, the Government has said it is still analysing the responses to the recent consultation on IR35 and that means changes could still be announced in the future.
If you’re concerned about falling foul of IR35 regulations, please get in touch and we’ll provide the expert guidance you need.
Corporation tax will be cut to 18 per cent in England and Wales which is good news for business. However, the Chancellor also announced that corporation tax will drop to just 12.5 per cent in Northern Ireland. Could we see a swathe of businesses moving there?
New building projects
The big news in the Autumn Statement was billions of pounds for a variety of building and infrastructure schemes. This will obviously create a wealth of opportunities for contractors.
In his speech, the Chancellor boldly claimed “we are the builders”. However, with his crackdown on contractors, will he have the people he needs to deliver these projects?
- Key schemes announced in the spending review include:
- £2.3bn to build 400,000 new affordable homes around the country
- Clearance for 26 new Enterprise Zones to be created
- Plans for nine new prisons
- £2.3bn flood funding protected in ‘real terms’ to create more defences
- Capital funding for transport projects to rise by 50% by 2020
- £250m support for motorways and other roads in Kent to relieve pressure caused by Operation Stack
- Electrification of the Trans-Pennine, Midland Mainline and further sections of the Great Western Railway to go ahead
- £1bn for communities affected by a wave of new fracking projects
Crackdown on tax avoidance
The Chancellor is also providing £800m to further tackle tax evasion. This will be a fresh clampdown on disguised remuneration schemes, stamp duty avoidance, and the abuse of intangible fixed-assets regime and capital allowances.
No-one knows exactly how this will be tackled, but Danbro will be watching and will provide any relevant updates for flexible workers.
HMRC enters the digital age
A total of £1.3 billion will be invested in plans to transform HMRC into “one of the most digitally advanced tax administrations in the world”.
Under the plans, all businesses will be provided with an online tax account which will be updated quarterly. This could potentially provide work for large numbers of IT contractors and will ultimately streamline the tax process for all freelance workers.
Auto-enrolment and small business rate relief pushed back
Business rate relief for small businesses will be extended for another 12 months and the increments in auto-enrolment pension contributions will be postponed for six months to marry with a new tax year.
Managing Director of Danbro, Damian Broughton, says, “The Chancellor claimed this was a budget for business, but in reality he has put our economic recovery at risk.
This economy has grown for a number of years thanks to the strength of the UK’s flexible workforce. He’s now thanking those flexible workers by raiding their pockets.
Few will want to travel in the future and that will have a massive impact on British industry who are desperate for the skills contractors offer.”