Budget 2011: IR35 to stay in place

Budget 2011: IR35 to stay in place

Much criticised freelance tax rules will stay in place, the government has announced during today’s Budget.

Known as IR35, the tax rule outlines how freelancers are treated for tax purposes – either employed or self-employed.

The rules have been criticised as being far too complex, but rather than start again the government has introduced details to better administer IR35.

A dedicated helpline staffed by specialists will be set up, said the government today, and restrict review to high risk cases. An IR35 forum will be formed that will monitor HMRC’s approach.

Anne Redston, barrister at Temple Tax Chambers, said that keeping IR35 was “disappointing”.

Although she welcomed better administration of the scheme, she voiced concern that the complexity of the rules had failed to be dealt with.

“The real problem is that the definition is inherently unclear. People don’t know whether they’re [caught] in it or not,” she said. “The problems embedded within it won’t go away.”

The Office of Tax Simplification recently announced a series of options for the government to take on IR35. Options provided by the OTS were: to cancel IR35 – which it warned could increase tax avoidance; or reform through simpler ways to test a person’s tax status.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

The Budget 2011

George Osborne presented his second Budget 2011 on Wednesday 23 March 2011.

In his statement he said that the “Budget 2011 is about reforming the nation’s economy, so that we have enduring growth and jobs in the future”.

Towards the end of last year the government issued the majority of the clauses, in draft, of Finance Bill 2011 together with updates on consultations. The publication of the draft Finance Bill clauses is part of the government’s improvements in the way tax policy is developed, communicated and legislated. The Budget updates some of these previous announcements and also proposes further measures. Some of these changes apply from April 2011 and some take effect at a later date, so the timing needs to be carefully considered.

Our summary focuses on the issues likely to affect you, your family and your business. To help you decipher what was said we have included our own comments.

 

Main Budget proposals

  •     An additional 1% cut in the main rate of corporation tax to 26% from April 2011.
  •     Enhanced tax incentives for investment in higher risk companies and for SMEs investing in research and development.
  •     Reintroduction of Enterprise Zones.
  •     Entrepreneurs’ Relief limit doubled to £10 million.
  •     An increase in the mileage rate payable to own car drivers.
  •     Consultation on integrating income tax and national insurance contributions.
  •     Reduced inheritance tax rates for those giving one tenth of their estate to charity.

 

Previous announcements

Some of the changes detailed in this summary have been the subject of earlier announcements. Here is a reminder of some of the more important ones:

  •     Changes to tax and national insurance rates and thresholds
  •     Pensions – new regimes for tax reliefs and annuities
  •     Furnished holiday lettings changes
  •     The Corporate Tax Road Map.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.