Autumn Statement: 7 takeaways for contractors and limited companies
The Chancellor’s first Autumn Statement contained some pretty eye-watering sums. The estimated cost of Brexit at £58.7bn and an extra £122bn of borrowing in this parliament are two of the biggest.
There were some positive numbers though. £26bn to fund investment in housing, transport, digital technology and research and development will prove valuable to contractors in some of these industries.
Others, meanwhile, will be left counting the cost of tax increases. Here are seven of the most important points for contractors and limited company owners.
1. Public sector IR35 restrictions will go ahead
Despite warnings from industry experts, the IR35 restrictions for contractors working in the public sector will go ahead as planned.
The changes will mean that whoever engages a contractor (the public sector body) will assume the responsibility for determining the contractor’s tax status. In effect this will mean that many contractors will pay more tax liability.
2. Another 5% blow for public sector contractors
To further dampen the spirits of public sector contractors, the Autumn Statement also says that the 5 per cent tax-free allowance will also be withdrawn from those working in the public sector.
The withdrawal, the treasury claims, reflects the fact that public sector contractors no longer need to take on the administrative burden of determining the rules.
3. Increase in flat rate VAT scheme
The flat rate from the flat rate VAT scheme will increase from 12 per cent to 16.5 per cent for many limited company owners, potentially costing them hundreds or thousands of pounds every year.
In his speech the Chancellor said he wanted to “shut down inappropriate use of the VAT flat rate scheme.” The move will force many limited companies back onto the variable scheme increasing the administrative burden on them significantly.
4. Confirmation of corporation tax cut
It’s not exactly a new policy, but the Chancellor was keen to confirm that the rate of corporation tax will fall to 17 per cent. This, he said, is “by far the lowest overall rate of corporate tax in the G20.”
Limited companies that pay corporation tax will welcome the cut, but many will have wished for something new. The original plans called for a cut to 15 per cent.
5. Strategic investment boost
The Chancellor announced that he would add to the country’s burgeoning debt pool with additional borrowing of £23 billion over the next five years to invest in infrastructure and innovation to raise productivity in the UK.
The signs are that the Chancellor will focus on quick wins in rail and road infrastructure while also committing money to research and development particularly in the science and technology industries.
Infrastructure spending is a positive for all sorts of contractors and limited company owners, particularly those in construction, science, technology and other connected sectors.
As well as infrastructure spending the Chancellor also announced an extra £1.4bn to build 40,000 affordable homes and £2.3bn to develop infrastructure in areas where there is a high demand for homes.
The government will also relax restrictions on house building grants, representing another positive for the construction industry.
7. Digital infrastructure investment
As well as physical investments the Chancellor also committed to spending more on the nation’s digital infrastructure. In particular he focused on the rollout of superfast fibre-optic cable and proliferation of 5G internet access.
He announced £1bn of spending on the country’s digital infrastructure and 100 per cent business rate relief for five years on new fibre infrastructure.