Autumn Statement

Autumn Statement – Contractors and Small Businesses

3 December 2014
Today, 3rd December 2014, the Chancellor George Osborne delivered his Autumn Statement (#AS2014).
 
The Autumn Statement is the Chancellor’s summary on the state of the economy and the taxation, benefits and spending plans for the forthcoming tax year (starting 6th April 2015). It is very similar to the actual Budget. Prior to the Autumn Statement it was believed it would contain numerous tax cuts designed to help gain votes at the forthcoming General Election.
 
At Umbrella we have reviewed not only the speech but the published Autumn Statement Document that summarises in more detail the proposed changes.
 
There are a number of key changes that affect all tax payers and therefore also contractors. 
 
For the Tax Year 2015/2016 (6th April 2015 to 5th April 2016) unless stated otherwise:
 
Changes to Personal Taxation
 
For contractors and freelancers operating through an Umbrella Company or receiving Dividends or wages through their own limited company:
 
Personal Allowance – Increase to £10,600 (amount you have to earn before you pay tax)
 
Changes affecting Small Businesses
 
For contractors and freelancers operating through their own limited companies the following changes affect small businesses and owner managed limited companies:
Small Business Rate Relief - Doubled for a further year, and inflation-linked increase in business rates capped at 2%. 380,000 smallest businesses will pay no rates at all.
 
Changes affecting Umbrella Companies
 
Included in The Chancellors Statement were the following clauses:
 
1.251 As part of its reform of the rules for employee benefits and expenses in response to recommendations by the Office of Tax Simplification, the government will stop tax relief from being claimed on reimbursed business expenses when they are paid in conjunction with a salary sacrifice scheme. The government is also concerned at the growing use of overarching contracts of employment by employment intermediaries such as ‘umbrella companies’, which allow some temporary workers to benefit from tax relief for home to-work travel expenses that is not generally available to other workers. The government will review these arrangements and publish a discussion document inviting representations from interested parties to inform potential future action.
 
2.147 Overarching contracts of employment and temporary workers – The government will review the increasing use of overarching contracts of employment by employment intermediaries such as ‘umbrella companies’. These arrangements enable workers to obtain tax relief for home to work travel that would not ordinarily be available. The government will publish a discussion paper shortly to inform possible action at Budget 2015.
 
Changes Affecting Recruitment Agencies
 
2.148 Employment intermediaries: penalties – The government will make a minor amendment to correct legislation underpinning the penalty regime for the late filing or non-submission of quarterly returns from employment intermediaries. This will take effect from 6 April 2015. (Finance Bill 2015)
 
Changes affecting Contractors and Freelancers
 
Prior to the Autumn Statement a number of potential changes were discussed that could benefit contractors and freelancers. These included a reduction in the VAT Rate, more clarity in respect of the IR35 legislation and hopefully a simpler and fairer system. These could have potentially included the introduction of a new type of limited company with its own set of tax rules specifically for freelancers called a freelancers limited company. Also in the news had been UCATT and Labour criticising the huge number of construction workers who could no longer operate through the Construction Industry Scheme (CIS) following the introduction of false self-employment rules.
 
There were no announcements in relation to the above.
 
Opportunities for Contractors
 
Various industries and projects also received boost which will no doubt help contractors working in those sectors.
 
Some of these are below:
 
The big bombshell was the change to the stamp duty system for home buyers/sellers. Designed to make the proposal for a Mansion Tax unnecessary and to stop the unfair current system whereby if you buy a house for £1 more it can result in you potentially paying £5k more stamp duty if it takes you above the £250k threshold! Stamp Duty will be less for 98% of people with expensive properties paying more. Tax duty at present is payable on the whole amount. Under the new system the initial £125,000 is not subject to tax. These changes start from tomorrow 4th December 2014 so good news if buying or selling a house. A stamp duty factsheet is available: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/382324/Stamp_Duty_15.pdf
 
Cut in Fuel Duty will remain.
 
A £7 billion Sovereign Wealth fund to be set-up to benefit the North of England and create a “Northern Powerhouse”. £6 billion on roads to reduce jams, introducing new modern trains and 20% more capacity to end overcrowding, developing HS3 to make east-west travel faster, and doubling the number of northern cities to benefit from the government’s superfast broadband programme. Funding will also go on building the North’s strengths in science, with major new science investments across the North.
 
£5.9 billion sustained investment in science. This includes £95 million to take the lead in the next European mission to Mars. £235 million will also go on a new science research centre called the Sir Henry Royce Institute in Manchester and £20 million will go towards a research centre on ageing, in Newcastle.
 
£2 billion additional funding for frontline NHS services in England in 2015-16. This is part of a multi-year £3.1 billion UK-wide investment in the NHS.
 
£1 billion will fund advanced care in GP practices over four years in England.
 
In England, at least £15 million will go to research in dementia, £150 million over five years will be invested to support young people with eating disorders. £200 million will go to develop new ways of caring for patients. £1.5 billion will go to local NHS services next year.
 
£15 billion on roads, nearly £6 billion funding for local road improvements, and over £2.3 billion towards over 1,400 flooding and coastal erosion protection schemes.
 
No Employers National Insurance on Apprentices under 25.
 
Umbrella provide accountancy and taxation services to small owner managed businesses and provide a PAYE umbrella company. Specialising in contractors and freelancers placed on short term temporary assignments through a recruitment agency.
 
For further information please call 0800 121 6513.
 
A full copy of the Autumn Statement is available: