As a result of the upcoming snap General Election, the Government has had to ditch most of the proposed Finance Bill 2017. The dividend allowance cut to £2,000 has been ditched (for now), but the public sector IR35 changes remain.
To ensure the Finance Bill passes into law before parliament is dissolved, the Government has deleted over 70 out of 135 original clauses – following discussions with the Opposition.
Although it is likely that many of the dropped measures will be included in a new Bill following the election, there is also the possibility that certain tax changes will be delayed or ditched altogether.
Making Tax Digital
The ‘Making Tax Digital’ (MTD) proposals which were due to be adopted by larger businesses from next year, and small firms from 2019, will now be delayed by at least 12 months.
This delay will be welcomed by small businesses in particular. Under the MTD proposals, the self-employed with turnovers above the prevailing VAT threshold (currently £85,000) will be required to file 5 additional tax returns each year, on top of their existing VAT filing obligations.
Dividend Allowance cut
Another victim of the cull is the proposed reduction in the Dividend Allowance from £5,000 to £2,000 from April 2018. This is a reduction in the dividend nil rate tax band – which was only introduced in April 2016.
The proposed Dividend Allowance cut would cost a basic rate taxpayer £225, and higher rate taxpayers £975 per year.
Public sector IR35 remains unchanged
Unfortunately, the single most controversial measure to hit the contracting industry in years – the public sector IR35 changes – remain firmly in the Finance Bill 2017. The new rules, which have caused chaos for all involved, were implemented on 6th April 2017.
And, a last-minute amendment has been made to ensure that private sector businesses which provide services to the NHS are outside the scope of the new IR35 rules. According to a guidance note, the definition of a ‘public authority’ “unintentionally brings some private sector businesses within the scope of the off-payroll working in the public sector measure because they provide services on behalf of the National Health Service (NHS).”
What happens next?
You can see which clauses have been deleted, and those which remain in this handy diagram.
Other removed proposals include:
- Plans to increase probate fees – up to £20,000 for the largest estates.
- Planned reduction in the ‘Money Purchase Annual Allowance’ for over-55s from £10,000 to £4,000.
- Changes to non-domicile rules.
- The allowance for employed-funded pension advice was due to be increased to £500.
The next Government will be able to reinstate any of these measures in a new Bill following the election. However, several major tax bodies, such as the CIOT and ICAEW, are hopeful that this pause may result in a rethink by a future administration, as well as the chance for the original proposals to undergo proper parliamentary scrutiny.