The next Budget will be delivered on Monday 29th October. The main focus of the contracting community, of course, will be on whether or not the ‘off payroll’ IR35 rules will be extended to the private sector.
Extension of the off payroll rules to the private sector
The off payroll rules themselves were first imposed upon all public sector organisations from April 2017, attracting widespread criticism from across the business world.
Despite the chaotic implementation itself, and a complete lack of confidence in the accuracy of the CEST tool (which ‘helps’ clients work out the employment status of contractors), a consultation over the extension of the rules to the private sector was run from mid-May until August 10th this year. This propsect received a resounding thumbs down from industry.
Will the Treasury take time to digest the alternative solutions offered by respondents to the consultation? Will the Government press ahead with the extension regardless? And if they do proceed, could the extension go ahead from April 2019 (unlikely due to time pressures), or from April 2020 or even 2021?
Ominously, the BBC published an article “Hammond plans tax crackdown on the ‘synthetic self-employed'” on 11th October – quite possibly another example of the Treasury ‘testing the water’ pre-Budget.
Is the Treasury 'testing the water' pre-Budget? Front page on the BBC business site today – private sector IR35 extension discussed – https://t.co/pkTzctNJ17
— IT Contracting (@justcontracting) October 11, 2018
Other thoughts / predictions
Although tax receipts are strong, and the public sector net borrowing reached a 16 year low (April to August), the Chancellor needs to raise funds to meet the Government’s pledge to increase NHS spending by £20bn by 2023, and his ability to produce tax giveaways will be offset by the looming needs of a potential economic shock caused by Brexit.
Here are some of the potential targets discussed within the media in recent weeks.
- Internet sales tax? As shopping habits change, and big names use offshore structures to minimise their worldwide tax liabilities, an ‘Amazon tax’ would surely be well-received.
- Fuel duty has not been increased for 8 years – Philip Hammond said that the freeze may need to be “looked at again” earlier this month. The freeze could cost the Treasury £38bn over the next 3 years.
- Entrepreneurs relief – last month, the Resolution Foundation claimed that the Government could raise £2.7bn per year by scrapping the tax incentive for people who sell their businesses. Individuals pay just 10% on eligible capital gains, subject to a lifetime limit of £10m.
- Pensions tas relief – famously raised as a potential target prior to every Budget in memory. In July, The Times reported that the Government is considering a flat 25% rate of pension tax relief. Alternatively, the annual contribution limit could be reduced from its current £40,000 level. Either policy would raise billions for the Treasury.
First Budget held on a Monday
The Budget will be held three weeks earlier than last year – moved back no doubt to avoid a clash with the Government’s Brexit negotiations in November.
Interestingly, this will be the first ever Budget held on a Monday… Spectator editor Fraser Nelson suggests this is to avoid some potentially unfortunate headlines.
Hammond confirms what James Forsyth revealed ten days ago: UK is to have its first-ever Monday budget. 29 Oct. Why a Monday? Hammond wanted Wed 31st until civil servants pointed out it was Halloween, inviting headlines like “Hammond’s house of horror”. So Monday it is. https://t.co/Nz7o18MQfv
— Fraser Nelson (@FraserNelson) September 26, 2018
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