There was very little of interest for freelancers and contractors in last week’s Autumn Statement. The main focus of George Osborne’s announcements were personal tax changes and efforts to help High Street businesses. Perhaps the only item of interest for the self-employed was a mention of increased anti-avoidance activity targeted at “false self-employment” – an ill omen for those already suffering at the hands of IR35.
The PCG sought clarification on the matter from HMRC, who stated the new anti-avoidance measures are designed to crack down on large-scale avoidance schemes, in particular those designed to minimise Employer National Insurance contributions – so it seems freelancers and contractors may have dodged this particular bullet. The anti-avoidance measures announced in the Autumn Statement are the largest package yet, aiming to recoup £9 billion in lost tax over five years (the package announced in the 2013 Budget was designed to claw back just £1 billion). HMRC certainly aren’t resting on their laurels – yesterday saw a £400 million victory over an avoidance scheme run by Consulting Overseas Limited.
Today saw the publication of the draft Finance Bill 2014, containing the precise wording over the new avoidance measures – and sure enough the hammer appears to fall on large avoidance schemes rather than individual freelancers:
“This change has been introduced to prevent the avoidance of employment taxes by UK agency engaging UK workers via non-UK agencies. It supports the Government’s anti-avoidance policy.”
“There are many legitimate reasons why a worker is engaged on a self-employed basis. The Government strongly supports enterprise and welcomes the contribution these entrepreneurs make to the economy. They recognise the additional financial risks someone who is genuinely self-employed takes and believe this should be recognised in the tax system.”
The consultation also notes that there is not an intention to change the way IR35 currently operates:
“The Government does not intend that the proposed strengthened legislation applies to personal service companies (PSCs) differently to the way it does currently. The interaction between, and the order in which, the agency legislation, managed service company legislation and intermediaries legislation (IR35) apply will remain as it is currently.”
Other tax changes
Elsewhere in the Autumn Statement, Chancellor Osborne confirmed a planned increase in the Personal Allowance to £10,000 from April 2014, and also introduced a new mechanism allowing married individuals to transfer up to £1,000 of their Personal Allowance to their spouse (providing they do not use it themselves, and their partner does not pay above the basic rate of Income Tax). In a bid to help businesses looking to employ young people, from April 2015 employees under 21 years old will no longer incur employer National Insurance contributions.
The Chancellor also made significant changes to Business Rates, including a £1,000 discount for the smallest businesses, and a 50% cut in rates for businesses which move into premises that have been unoccupied for more than a year (so-called Reoccupation Relief). All of the changes to Business Rates can be found here (PDF).
Elsewhere there were positives for those working from home, and those who travel to work, with a cancellation of the planned rise in Fuel Duty and a scrapping of green levees on utility bills translating into an average £50 saving from January.
There was also an expansion of the Startup Loans scheme, with another 50,000 spaces being opened up.
Photo by UK Parliament