As the curtain draws on the first Autumn Statement under a majority Conservative Government, relieved contractors and small business owners across the country are wiping the sweat from their brows… for now at least.
The rumoured one-month rule that would deem them a full-blown employee if they spent longer than a month in the same workplace hasn’t yet surfaced. Surprisingly, there was no mention of IR35 reform at all throughout the Statement’s whopping 154 pages. However, our Micro-business Ambassador Jason Kitcat has heard suggestions inside Westminster that HMRC could make an IR35 announcement around 9th December. So the Autumn Statement probably won’t be the final word this year for policy affecting contractors and freelancers.
Overall, this Autumn Statement and Spending Review had little to offer the 8.4 million people who work in the micro-businesses community. Smaller businesses barely got a mention and there was no rethink on the hike in dividend taxes which will hit the micro business sector the hardest. By our count the Chancellor spent roughly fifteen seconds addressing the second-largest business community in the UK.
But what did make it into the Statement and how will this affect our client base of freelancers, contractors and small businesses?
Dividend tax changes
As announced in the 2015 Summer Budget, increases to dividend taxes are still planned to go ahead from April 2016. Even after coming into force, any of our clients earning over £28,000 in profit will almost always be better off as a limited company director than as a sole trader or an employee.
Potentially, from April 2019 any capital gains tax due will need to be paid within 30 days of completing the sale of residential property. This is a significant reduction in the amount of time previously allowed.
Tax relief on travel and subsistence
A short consultation is planned about any individuals working for intermediary companies and claiming travel and subsistence (including personal service companies). The area is complex and you may require specialist advice if you are considering working through an agency, personal service company, or umbrella company.
As of April 2016 Stamp duty will go up by 3% on purchases of additional properties above £40,000, such as buy-to-let houses or second homes. This excludes caravans, mobile homes or houseboats.
An anti-avoidance tax rule will be brought in to prevent people misusing opportunities for income to be converted to capital when closing a company in order to gain a tax advantage (capital is only taxable in particular circumstances). Details will be confirmed later in the year.
Making tax digital
£1.3 billion will be invested to digitally revamp HMRC. Most self-employed businesses will now be required to keep track of their tax digitally and give quarterly updates. We’re working closely with HMRC to inform their early design work and to see how our software can be used for any future changes.
A new, simpler process for paying tax is being planned for 2016/17. Based on digital tax services in Scandinavia and Estonia, those with simple tax affairs will be sent a pre-filled calculation which they can agree and pay easily.
Other relevant notes
While those are the main points that are likely to affect your self assessment, it’s worth being aware of these other announcements, though most won’t impact micro-businesses directly:
The 3% differential between diesel and petrol cars on company cars will be kept until April 2021.
- A new criminal offence will be introduced that removes the need to prove intent for the most serious cases of failing to declare offshore income and gains.
- Tough new measures will be introduced for those who persistently enter into tax avoidance schemes that are defeated by HMRC.
- A new penalty of 60% of tax due will be charged in all cases successfully tackled by the General Anti-Abuse Rule (GAAR).
- Action will be taken against those who have used (or continue to use) disguised remuneration schemes, and who have not yet paid their fair share of tax.
- An apprenticeship levy will be introduced in April 2017. It will be set at a rate of 0.5% of an employer’s payroll and will be paid through PAYE. Each employer will receive an allowance of £15,000 to offset against their levy payment. This means that the levy will only be paid on any payroll in excess of £3 million.
More announcements are due 9th December 2015 with the publication of the draft finance bill – so watch this space.
What do you think?
A survey we conducted last week showed that just 0.1% of our clients think the Government supports micro-businesses, and we suspect the Autumn Statement will have done little to change their feelings.
Have you had a change of heart? Let us know in the comments below!