Autumn Statement: a giveaway for contractors?
Once the dust has settled and the analysis over and done with, the Autumn Statement delivered by Chancellor George Osborne yesterday may well be looked back on as positive for business.
With the economy in good shape, and the Chancellor all too aware that he will be challenging a party leadership contest in the not too distant future, it looks as though he is trying to shirk the unpopular public image of ‘George the Cutter’.
Our interpretation of the restriction on Travel & Subsistence expenses is that it will only apply to contractors working through their own limited company that are caught by IR35 legislation.
However, other commentators in the industry interpret the statement made to be that restrictions will apply to umbrella company workers and PSC’s caught by IR35 and that potentially there may be a Supervision, Direction and Control type test to see if a worker is entitled i.e. that they are truly self-employed.
The key part of the statement was:
“Employment intermediaries and tax relief for travel and subsistence – As confirmed at Summer Budget 2015, the government will legislate to restrict tax relief for travel and subsistence expenses for workers engaged through an employment intermediary, such as an umbrella company or a personal service company. Following consultation, relief will be restricted for individuals working through personal service companies where the intermediaries legislation applies. This change will take effect from 6 April 2016.”
We interpret the reference to umbrella companies as only being there to define what an Employment Intermediary is. If you then take that part out of the statement it clearly appears to state that following consultancy the only change will be in respect of PSC’s caught by IR35.
This will become clearer on the 9th December when further detail is released. Either way we will work within the guidelines and ensure appropriate reliefs are only claimed where allowed.
But there was other positive news for contractors as George Osborne tried to reinvent his image with the British public.
Enter George the Builder
The Chancellor made a number of important announcements about the future of housing and infrastructure that will be of particular interest to contractors in the construction industry, as well as those looking to buy a new home.
One of the key priorities of the Spending Review is to double the housing budget from 2018-19 as part of government plans to deliver an extra 400,000 affordable homes by 2020-21.
The government also plans to back SME house builders by amending planning policies on small sites, extending the £1 billion Builder’s Finance Fund to 2020-21 and halving the length of the planning guarantee for minor developments.
All of these extra housing projects and extra support for small-scale construction firms will be good news for independent contractors as they look for more work. It could also make housing cheaper for those looking to buy.
The Chancellor also planned to bolster Britain’s infrastructure. In his speech to the Commons he said: “By making the difficult decisions to save on day-to-day costs in departments, we can invest in the new roads, railways, science, flood defences and energy Britain needs.
“We made a start in the last Parliament – and in the last week Britain topped the league table of the best places in the world to invest in infrastructure.”
Among the priorities for infrastructure spending are the HS2 Northern Powerhouse link, Transport for the North, cycle lanes, flood defences, small modular nuclear reactors and the first permanent British pothole fund.
The chancellor also announced significant projects for the defence and prisons sectors. For contractors with links to any of these sectors, there may be good reason to smile.
Where is all the money coming from?
One question that will almost certainly be asked after this fairly generous budget is where all of the money is coming from.
Better than expected economic growth figures have given the Chancellor some freedom to, for example, completely cancel his plans to cut working tax credits.
There are a few potential tax rises to be wary of.
Local authorities will be given the opportunity to increase council tax by 2% to help pay for social care in the community. This measure will hit certain councils harder than others.
Another tax rise that may affect some of our contractors is the new higher rate of Stamp Duty for the purchase of additional properties, like second homes and buy-to-lets.
A number of contractors, particularly those in the construction industry, use buy-to-let properties as long-term investments, often in place of a pension.
This new rate of Stamp Duty, along with previously announced changes to tax on mortgage payments for buy-to-let properties, will make investing in additional properties more expensive.
The new rate of Stamp Duty will come into effect in April 2016.