*Draft legislation is expected to be released on 5 December 2016 and will define the qualifying expenditure used to determine whether the new FRS category will apply. We currently understand that qualifying expenditure excludes the purchase of capital assets, food and drink consumed by the business or employees (subsistence) and motoring costs. The accounting period over which the qualifying expenditure test is to be applied will also be defined. Proposals refer to the purchase of goods, the draft legislation is expected to set out whether goods will also mean services.

Anti-avoidance legislation has already been issued to avoid manipulation of gross income. Further anti-avoidance provisions are expected in the draft legislation.

There will be an 8 week consultation period during which stakeholders can respond to the draft legislation before it is included in the draft Finance Bill 2017

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From 1 April 2017 contractors registered under FRS will be required to consider whether their qualifying expenditure exceeds the minimum threshold, each year, and where the minimum threshold is not met, the new category must be applied. Contractors will be able to revert to their previous category if, during the future, their qualifying expenditure exceeds the threshold.

The detail of the scheme's operation will be set out in legislation expected on 5 December 2016. This should provide clarity on what expenditure qualifies (please refer to disclaimer text above).

Anti-avoidance measures will be in place to restrict the opportunities to manipulate income and qualifying expenditure.

This calculator is intended to help you assess the impact of the planned changes. Please move the sliders as appropriate in your circumstances. For expenditure, you should exclude any asset purchases, subsistence and motoring costs and be aware that the question of the cost of services remains uncertain.

What next?

After the draft legislation is issued on 5 December, we will understand more about the full impact of these changes. We plan to release a general guide to how Limited Company contractors will be affected and, as usual, our clients will have access to tailored advice based on their personal circumstances.