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The new rules on travel and subsistence (T&S) tax relief came into force on 6 April. In the same week, unethical but legal tax systems, benefitting the very top of society, were exposed in the Panama Papers.
Umbrella.co.uk director Miles Grady explains why we need a change.
Last week was characterised by two big bits of finance news. The start of the new tax year brought planned T&S tax relief restrictions into force for many contractors.
Launched in 2011, the government’s Plug-in Car Grant (PiCG) sought to encourage the adoption of ultra-low emissions vehicles (ULEVs) to benefit the environment, communities, public health, the future of fuel and energy, and also motorists’ finances.
The government has published its Finance Bill, confirming a number of important amendments from the Budget and Autumn Statement.
It contains a number of important details about travel and subsistence (T&S) tax relief for contractors engaged through an employment intermediary, like an umbrella company.
Travel and subsistence
Clause 14 of the bill refers to ‘travel expenses of workers providing services through intermediaries’, detailing important changes to T&S tax relief for contractors engaged through umbrella companies.
The document includes a number of amendments, but none that were unexpected.
In the past, contractors working through umbrella companies have been able to offset ‘reasonable’ expenses like travel and accommodation against their tax bill to increase their take home pay.
The new Finance bill confirms a number of restrictions to this, particularly regarding how the new rules will be applied.
The Chancellor George Osborne has announced significant changes that might affect people working in off-payroll public sector jobs.
The announcement will change the way that IR35 legislation is applied - meaning that public sector organisations and authorities including Whitehall departments, schools, the NHS, police and public sector broadcasters like the BBC and Channel 4 - will be responsible for interpreting and enforcing the rules from April 2017.
There will be no change for off-payroll workers in the private sector, although this could change in the future.
Two organisations representing the interests of small business owners and self-employed workers have urged the Chancellor to deliver a budget that backs enterprise on Wednesday.
George Osborne, they argue, has to recognise the impact that small businesses have on the economy in terms of driving growth and creating jobs.
At a time when tax and pension changes are making things difficult for business owners, it is crucial that the Budget statement sends a strong signal to small businesses.
The Federation of Small Businesses (FSB) used its pre-budget statement to urge the Chancellor to reform business rates and simplify the tax system.
A mammoth technical policy document published alongside the Budget on March 16th contains a measure that will be unnerving to any contractors who have outstanding loans from an ‘employer’ or a company that they own.
The Chancellor’s budget statement was more than a fortnight ago, but the consequences of announcements for everyday taxpayers are still emerging. Among the partially buried announcements is this good news for contractors, who may have been unable to take advantage of previous childcare schemes.
The eagerly awaited Tax-Free Childcare (TFC) scheme was delayed following a legal challenge in 2015, but the new scheme will now come into force in ‘early 2017.’
The Chancellors fourth Budget in 12 months arrived on Wednesday and it confirmed a number of policy changes that we already knew were going to arrive. Restrictions on Travel and Subsistence tax relief for IR35 contractors and changes to the dividend tax will take effect as planned in April.
The most significant new announcement will be of concern to contractors working through a personal service company (PSC) in the public sector.
An HMRC policy document reveals that from April 2017, public sector organisations will be responsible for enforcing IR35. This marks a significant change from the current system, whereby the PSC or agency judges whether a contractor is caught out by IR35.
Effectively, this means that many more public sector contractors will fall under the remit of IR35 legislation and will receive less take home pay as a result. This change is scheduled to take effect in April 2017 following a consultation.
A new report has recommended that income tax and national insurance contributions (NICs) should be brought closer together in order to make a tax system that is fit for the future.
However, some fear that the exercise in simplification could lead to a system of winners and losers, with some paying more in taxes and others paying less.
One of the biggest losers under the new system is likely to be some self-employed people, who benefit under the current system of NICs.
The report from the Office of Tax Simplification (OTS) lays out a seven-stage programme for bringing national insurance more in line with income tax.
The headline recommendation is for NICs to be paid on an annual, cumulative and aggregate basis, instead of the current system where NI is calculated weekly or monthly.
New National Minimum Wage regulations will take effect on April 1st and all employers will be required to meet them.
The National Living Wage will apply to employees aged 25 and over and it will essentially mean that employers will have to pay their staff an extra 50 pence per hour, with the rate set at £7.20.
The requirement could put many small and medium sized business owners in a difficult position, particularly if they operate in the margin-conscious retail sector or employ a lot of minimum wage employees.
