The Budget Statement sets out the government’s fiscal plan for the short-term future of the UK economy but there was really only one item of any interest to the country’s contractors so let’s get straight to it.
Private Sector Off-Payroll Reforms
We knew that the Chancellor was going to introduce the IR35 reforms to the private sector, we just didn’t know when. Now we do: April 2020.
These changes mainly revolve around shifting the burden of responsibility for confirming IR35 status from the contractor to the end-client or agency. If the contractor is IR25 caught then the agency or end-client will also be responsible for operating tax and NI deductions. The risk of getting this wrong will also rest with the end-client or agency and the concern is that the risk-averse will simply make blanket “inside-IR35” assessments as has been seen in the Public Sector.
We are encouraged already by the private sector response and we, along with our legal team and other advisers and pressure groups will be working tirelessly to come up with workable solutions and plans so that our clients, and the wider contractor community, are not adversely affected.
Personal Allowance and Higher Rate Threshold
From tax year 2019/20, the personal allowance will be raised to £12,500 and the higher rate threshold will increase to £50,000.
With many contractors moving back to staff positions because of the uncertainty around the off-payroll reforms, ER and Capital Gains has been an important tax planning tool.
Effective from April 2019, in order to qualify for ER, contractors and other entrepreneurs will need to have owned their business for two years (up from one) before selling or disposing.
VAT registration threshold
The VAT registration threshold will be maintained at £85,000 for the next two years at least.
Commenting on the IR35 reforms, Alan Broome, Broome Affinity Group’s directors said “On the face of it, this is good news for those of us inside the contractor bubble, as we know the reforms are being implemented in eighteen months and not the unworkable six months many (including us) feared. But other than that there are a significant number of concerns about the reforms, significant enough in fact that the government have admitted that it will already need to refine the reforms.”
So once again, we are in what our pals at IPSE describe as a “holding pattern despair” with the only certainty being that things are still uncertain. For now, it’s business at usual at Broome Affinity Group and we’ll continue to strive to provide the best contractor accounting solution around. Rest assured that in the meantime, and for the next eighteen months at least, we are working hard, very hard indeed, on ensuring the contractor model continues to be viable beyond April 2020.