Autumn Statement A summary of the Autumn Statement 2016

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Linette Kelly
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1 Autumn Statement A summary of the

2 Contents Company/Business Tax Introduction 3. Company/Business Personal Tax Tax Personal Tax 4. Other taxes Other taxes

3 1. Introduction This document summarises key changes to tax rates relevant to contractors, freelancers & selfemployed professionals to come out of the governments delivered on 23rd November. This summary is published by Brookson, a leading provider of accountancy, tax advice and support services to freelance contractors, interims, locums and small businesses. We support our customers in their chosen way of working through their Limited Company, Umbrella Employment solutions and SME Accountancy services. 3

4 2. Company/Business Tax Tax 2.1 Off-Payroll Engagement in the Public Sector IR35 reform within the public sector is the key announcement today impacting contractors and the recruitment businesses which place them. There has been a significant period of HMRC discussion and consultation on what changes they should make to IR35 to improve perceived levels of non-compliance within the public sector. Despite unanimous opposition to the changes proposed by HMRC during the summer, the Government has decided to press on and introduce them on 6 April Therefore, from April 2017 the entity which pays the contractor s limited company (most likely to be either the public sector body or a recruitment agency) will become responsible for assessing IR35 and deducting the resulting tax from payments made to the limited company. As a result, if you are a contractor working on an assignment for a public sector client, from April 2017 you may see PAYE tax being withheld from the payments your company receives if your client or recruitment agency believe that you are caught by IR35. This doesn t mean that you are no longer able to contract through a limited company but your take home pay may be affected if your public sector client or agency believes you are working on an assignment caught by IR35. It is difficult to say at this stage what precise impact these changes are will have as it is likely to be very much dependent upon how the company (public sector client or agency) which pays your limited company interprets the IR35 rules and their attitude to risk. At one end of the spectrum a risk adverse recruitment agency may take a blanket view that PAYE will be withheld from all payments made to limited company contractors working on a public sector assignment. At the other end of the spectrum a recruitment business could fully consider the IR35 position to ensure their contractors continue to be paid in the correct way. A contractor s willingness to accept an assignment in the public sector may now be driven by the engagers approach to IR35. Issues to be ironed out over the coming months include clearly defining what a public sector client is, how PAYE (which is a personal tax) can be withheld on payments made to a limited company and how contractors who disagree with the IR35 opinion or obtain an alternative opinion from their advisor can submit an appeal and reclaim any tax overpaid. 4

5 Brookson s current view on this is that we now need to see public sector bodies and recruitment agencies who supply contractors to the public sector deciding how they are going to react to these changes and ensure that they keep their contractors updated to enable them to make informed decisions prior to the changes coming in. We would encourage contractors working through a limited company with an assignment with a public sector end client to obtain an up to date IR35 opinion to enable them to consider their options post April Company/Business Tax Contractors working in the private sector will not see any changes to the current IR35 regime. 2.2 Corporation Tax Rate It was reconfirmed today in the 2016 Autumn Statement that Corporation Tax would still be reduced from the current 20% to 17%, effective from April National Insurance Contributions From April 2017, it was today announced in the Autumn Statement that the National Insurance Primary thresholds will be aligned, meaning that both employees and employers will start paying National Insurance on weekly earnings above Salary Sacrifice Following the governments consultation, the tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April This is with the exception of arrangements relating to pension (including advice), childcare, cycle to work and ultra-low emission cars. This will mean that employees swapping salary for benefits will buy them out of their post tax income. Arrangements in place before April 2017 will be protected until April 2021, and arrangements for cars, accommodation and school fees will be protected until April This will not impact Limited Company Contractors or Brookson Umbrella Employees. 5

6 VAT Personal Measures Tax It was announced in today s Autumn Statement that the government will introduce a new Flat Rate VAT rate of 16.5% from 1 April 2017 for businesses meeting the definition of a limited cost trader. A limited cost trader will be defined as someone whose VAT inclusive expenditure on goods is either: Less than 2% of their VAT inclusive turnover in a prescribed accounting period Greater than 2% of their VAT inclusive turnover but less than 1000 per annum if the prescribed accounting period is one year (if it is not one year, the figure is the relevant proportion of 1000) Goods, for the purposes of this measure, must be used exclusively for the purpose of the business but exclude the following items: Capital expenditure Food or drink for consumption by the Flat Rate business or its employees Vehicles, vehicle parts and fuel (except where the business is one that carries out transport services - for example a taxi business - and uses its own or a leased vehicle to carry out those services) Draft secondary legislation will be published on 5 December 2016 and businesses will have 8 weeks to comment. Brookson will be able to carry out the relevant calculations on your behalf should they be required to determine whether you should use the new rate. 2.6 HMRC Support for Emerging Insolvency Risks HMRC will develop its ability to identify emerging insolvency risk, using external analytical expertise. HMRC will use this information to tailor its debt collection activity, improve customer service and provide support to struggling businesses. We are aware that over the last 4 or 5 years, HMRC have not been as proactive as they used to be in chasing limited companies which fail to pay their tax bills on time. This threat of HMRC becoming more proactive in the future should encourage more limited company contractors to manage their company finances better and engage with their accountant if they get into financial difficulties in advance of HMRC debt collection activity commencing. 6

7 3. Personal Tax 3.1 Income Tax The Chancellor has announced in the 2016 Autumn Statement that the rates previously announced for 2017/2018 will remain unchanged: Personal allowance increase to 11,500 from April 2017 ( 11, /2017) Higher rate tax threshold increase to 33,500 ( 32, /2017) Overall increase in total allowances & basic rate threshold to 45,000 Additional tax rate threshold remains unchanged at 150,000 It was confirmed today that the government will meet its commitment, by the end of this parliament, to raise the income tax personal allowance to 12,500 and the higher rate tax threshold increase to 37,500, meaning individuals will need to earn a total of 50,000 before they incur a higher rate tax liability. 3.2 Benefits in Kind The government will consider how benefits in kind are valued for tax purposes, a consultation will be issued and once Brookson has more information we will review this. 3.3 Employee Business Expenses The government will be announcing further guidance at Budget 2017 on the use of income tax relief for employee s business expenses, including those that are not reimbursed but their employer. This has the potential to inadvertently impact limited company contractors and will be keeping an eye on how this evolves. 3.4 Lifetime ISA and ISA Limit It was announced that from April 2017 for adults under the age of 40 that a new lifetime ISA will be available. You will be able to contribute up to 4,000 per year and receive a 25% bonus from the government. Funds, including the government bonuses, can be used to buy a first home at any time from 12 months after the account opening and can be withdrawn from age 60. The overall annual ISA subscription limit will be increase to 20,000 from April

8 4. Other Taxes 2. Company/Business Tax 4.1 Disguised Remuneration The government announced in the Budget 2016 that it intended to take action against those who have used or continue to use disguised remuneration schemes and who have not yet paid their fair share of tax. The government have today announced that this will be extended to tackle the use of disguised remuneration avoidance schemes and the self-employed as well. This mainly impacts people using tax avoidance vehicles such as Employee Benefit Trusts or other contractor loan schemes and will not impact Brookson customers. 4.2 Income from Trading or Property For those making small amounts of income through trading or property, the Chancellor announced today that from April 2017 individuals with property income or trading income below 1,000 will no longer need to declare or pay tax on that income. 4.3 Class 2 National Insurance If you are currently registered as a sole trader Class 2 National Insurance will be abolished effective from April Further Information If you require any further information or assistance regarding today s Autumn Statement, please feel free to contact one of our Specialist Customer Advisors on or newbusiness@brookson.co.uk. 8

BROOKSONONE.CO.UK SPRING STATEMENT 2018

BROOKSONONE.CO.UK SPRING STATEMENT 2018 1.INTRODUCTION This document summarises the key changes to tax rates relevant to contractors, freelancers & self-employed professionals that were previously announced