The Chancellor delivered his latest Budget at 12.30 today. For contractors, there is no immediate extension of the ‘off-payroll’ IR35 rules to the private sector, but a consultation will be launched to cover this eventuality.
Whether or not the Treasury plans to extend the legislation in 2018, 2019, 2020, or not at all remains to be seen. But, at least the industry now has time to mount a robust opposition to any planned implementation.
There will be no change to the current VAT registration threshold – something which was discussed at length in the media prior to today’s speech.
You can read the ‘Red Book’ here – containing the fine print of the Chancellor’s plans. This was published in various formats shortly after Hammond finished speaking.
We have listed the key points below – focusing on those which affect contractors and small businesses.
IR35 ‘off-payroll’ rules and the private sector
There is no immediate extension of the ‘off-payroll’ IR35 rules to the private sector, although a consultation will commence shortly. Section 4.3 of the Red Book states:
“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.”
What is your gut feeling on the Treasury extending the IR35 off payroll rules to the private sector?
— IT Contracting (@justcontracting) November 22, 2017
Julia Kermode, chief executive of FCSA, welcomed the news: “It is very positive that the Government has not simply bulldozed ahead with legislation that would have a negative impact on the flexible workforce and the UK economy as a whole.”
Chris Bryce, CEO of IPSE said that his organisation “…stands ready to join the consultation to ensure it takes into account the needs of the legitimately self-employed and accurately reflects the heavy damage the changes to IR35 have caused to the public sector.”
Other Key Points
- GDP growth forecast for this year (2017) downgraded from 2% to 1.5%.
- GDP downgraded to 1.4%, 1.3% and 1.5% in the following years before rising to 1.6% (2021-22).
- £3bn allocated to cover Brexit outcomes, over the next 2 years.
- Debt is expected to peak at 86.5% of GDP this year, before falling in subsequent years.
- Personal Allowance will rise to £11,800 from April 2018.
- The higher rate tax threshold will rise to £46,350 from April 2018.
- VAT registration threshold will be not be reduced from current £85,000 level. It will remain at this level for the next 2 years.
- Stamp duty abolished for first-time buyers on the homes worth up to £300,000. Normal stamp duty will apply between £300,000 and £500,000.
- The Government published a discussion paper following the publication of the Matthew Taylor report into employment practices, with a view to updating employment status tests in line with new ways of working.
- Future business rate rises will be linked to CPI, rather than the higher RPI measures of inflation.
- The planned increase in Class 4 NICs (paid by sole traders) will not rise from 9% to 10%, as originally planned.
- The annual ISA limit will be frozen at £20,000 for 2018/19.
- The 0% savings rate will remain unchanged for the first £5,000 or savings next year.
- The Lifetime allowance for pension savings will rise to £1,030,000 from 2018/19.
- The National Living Wage will rise from £7.50/hour to £7.83/hour from April 2018.
- Fuel duty will remain frozen in 2018.
- Beer, wine and spirit duty will be frozen, however, tobacco duty will rise in 2018.
- For a full list of key points, visit this BBC page.