An unprecedented attack on Contractors or a ‘Fairer’ society?
For the second time this year you could be forgiven if you have woken up this morning feeling both confused and concerned about what this latest budget means to you and your business.
What is positioned by the Chancellor to be a budget designed to promote a fairer deal for all (“one purpose, one policy, one nation”) and in support of business to help grow the economy has left many in our sector feeling “banished, battered and bruised!”
Below are the highlights (or should we say ‘lowlights’) from the Summer Budget that have the most impact on our sector and represent yet more challenges and legislative red tape for us to navigate:-
o Removal of the Dividend Tax Credit to be replaced by a Dividend Tax Allowance of £5,000, with tax applying on dividends over £5,000 at 7.5% for basic rate tax payers, 32.5% for higher rate tax payers and 38.1% for additional rate tax payers.
o HMRC to review and strengthen IR35 legislation with a view to tackle what they view as ‘disguised employment’.
o Removal of the Employment Allowance where the Company Director is also the sole employee.
o Formal consultation on ‘company distributions’ (potential impact on what can or cannot be considered a dividend payment to a shareholder).
• Umbrella & PSC
o Formal consultation on the removal of travel and subsistence relief for employment intermediaries (which include Umbrellas and PSC’s).
o Proposal for debt transfer to be included in any removal of travel and subsistence relief anti avoidance legislation.
These proposed measures are potentially very far reaching and could have a huge impact on Agencies, Umbrella’s and Contractors and of course, in turn, Hirers. Inevitably, and as always, the ‘devil will be in the detail’, and so we must wait with baited breath until all of these proposals are drafted, consulted upon and concluded before we can be absolute about what the impacts will be.
By way of contrast and in the interests of balance, it is not all bad news. The Chancellor also announced:-
• Personal Allowances set to increase to £11,000 as of April 2016 with a view to reaching £12,500 by 2020.
• Introduction of a Personal Savings Allowance on the first £1,000 worth of interest for basic rate tax payers.
• Employment Allowance increases from £2,000 to £3,000 from April 2016 (but see above).
• Reduction in Corporation Tax to 19% in April 2017 and then again to 18% in April 2020.
Remember, notwithstanding the challenges we will face, none of these proposals will be effective before April 2016 and some of them well beyond. Further, it is even possible that some of the proposals may change for the better as a result of planned consultations. But rest assured that Anderson Group will remain at the forefront of the consultation process and that we will continue to bring innovative solutions to market to ensure that our clients remain compliant, competitive and sustainable, whatever the final legislative landscape will be. We will be contacting you with regular updates and holding regular roundtable discussions which we encourage you to attend in due course.
In the meantime, if you would like to arrange a meeting to discuss the budget proposals in more detail, we would be delighted to hear from you.