Spring Budget 2017 – what contractors need to know

Following the Chancellor’s first and last Spring Budget on 8 March 2017, many will be thankful that the landscape has not changed more drastically. The Budget primarily confirmed the changes announced in the Autumn Statement, with only a few new measures that will affect Limited Company contractors.

 

We have today emailed our clients with our full report on the Budget announcements and how they may be affected. Please see below for a summary of the key points and contact us to find out more about becoming an Intouch client and benefiting from our expert advice tailored to your personal circumstances.

 

Key Spring Budget points for Limited Company contractors:

  • Dividend Allowance: An announcement that didn’t appear in the Autumn Statement – a reduction in the tax-free Dividend Allowance from 6 April 2018. The allowance will reduce from £5,000 to £2,000.
  • ISA savings limit: The Chancellor counter-balanced the Dividend Allowance changes by also announcing that the overall ISA savings limit will jump to £20,000 in 2017/18, from the current limit of £15,240 for 2016/17.
  • Off-payroll working in the public sector (IR35): Whilst some minor changes to the draft legislation have been made, the measures will become effective on 6 April 2017.
  • VAT Flat Rate Scheme (FRS): As announced in the Autumn Statement, changes to the VAT Flat Rate Scheme (FRS) will come into place on 1 April 2017 with the introduction of a new ‘limited cost business’ category.
  • New measures to tackle tax avoidance and evasion: A selection of measures has been announced, with the most notable new measure applying to those that enable tax avoidance schemes. A new Enabler penalty will apply when tax avoidance schemes are found not to work.
  • Corporation Tax: As pre-announced, the main rate of Corporation Tax will be reduced from 20% to 19% for the Financial Year beginning on 1 April 2017.
  • Corporate Gains Tax: The CGT annual exemption will be increased to £11,300 for 2017/18 from £11,100 for 2016/17.
  • Making Tax Digital for Business: Extensive changes to how taxpayers record and report income to HMRC are being introduced under a project entitled Making Tax Digital for Business. The Spring Budget announced a one year deferral from the mandating of MTDfB for unincorporated businesses and unincorporated buy to let landlords with turnovers below the VAT threshold (£83,000).
  • New consultations announced: Those notably likely to affect contractors include consultations on Rent a Room Relief, disguised remuneration (again), employee expenses and Benefits in Kind.

 

Further information

 

Still got questions? Our Personal Accountants are available right now to give tailored advice to our clients on how these announcements will affect them. Contact us to find out more about becoming an Intouch client.

‘Stable Brexit platform for a global Britain’ as Spreadsheet Phil delivers last Spring Budget

The Spring Budget 2017

 

Chancellor Hammond or “Spreadsheet Phil” as the Treasury call him, quietly delivered his 2017 Spring Budget today with a spring in his step and mischief in his face as he taunted the Labour benches opposite. He reminded me of a latter day Robin Hood, taking a little from the rich and giving a little to the poor(er) members of society. Not a bad ideal you may think, but does his tinkering go far enough?

 

I prefer him imitating Robin Hood rather than being the Sheriff who would take taxes from the vulnerable for selfish gain. In this Spring’s Budget nasty surprises were noticeably absent as Mr Hammond basked in the reflected glory of improved economic growth numbers recently published by the Office of National Statistics.

 

No doubt weaker sterling has resulted in inflationary pressures and, to protect living standards, more pounds are required in the pockets of UK citizens. Hammond believes his Budget addresses this balance but that view is not shared by the leader of the Opposition.

 

A cautious Budget; it boasts of fairness and to “levelling the playing field”, specifically with reference to National Insurance contributions from the self-employed rising closer to those of the employed. The Government’s strategy of closing the tax gap (the difference between the taxes that should be collected and those which actually are) seems to be working. A continued hard line on all forms of tax evasion and avoidance, with stronger compliance tools to police best practice, is hard to criticise.

 

Faced with ongoing criticism on the timetable and a paucity of clarity surrounding the introduction of the public sector off-payroll (IR35) changes in 4 weeks’ time, it was good to hear that the implementation of Making Tax Digital for some smaller businesses has been relaxed. Nevertheless the public sector changes are still expected to result in procedural and contractual chaos and HMRC’s digital status assessment tool ‘ESS’ will need a thick skin.

 

Flexible workers, contractors and freelancers who comprise the ‘gig economy’ feel with some justification that they have been ambushed again with reductions in the dividend allowance, Flat Rate VAT changes penalising ‘low cost traders’ and public sector IR35 reforms, all of which are causing chaos and extra cost in the temporary worker supply chain. There is no doubt that the taxation differences between the employed and the “self-employed” (including single director companies) require harmonisation, but any changes necessary to bring tax treatment in line with new economy ways of working must be explored and considered thoroughly and not as a knee jerk response to abuse by an unscrupulous few. Flexible workers may feel bruised but if the Sheriff had written the script then far more radical changes can be imagined.

 

Consistent pleas for patience and reflection from stakeholders have fallen on deaf ears and many commentators believe that the outcome is unlikely to deliver the returns that HMRC expects. I do hope that in balancing his books and sharing the wealth around Robin has not prematurely spent the money from the flexible workforce. Otherwise I think the job of collecting it will go back to the less amiable Sheriff and then it will be goodbye to fairness and simplicity.

 

Call me old fashioned, but I doubt next Autumn’s Budget will be quite so Robin Hood-ish.

 

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.