The Autumn Budget 2017 sent a mixed message to contractors, as the Government arguably took one step closer to extending the harsh public sector IR35 reforms into the private sector.
There were no immediate tax hikes that contractors have gotten used to in recent years. Instead, the Chancellor announced a series of consultations and discussion documents, which may well suggest Government is beginning to listen to the flexible working market regarding certain issues.
Consultation announced into IR35 in the private sector
The biggest news for contractors was the anticipated consultation into IR35 in the private sector. Despite the mayhem caused by the public sector reforms, the Chancellor insists that compliance has increased as a result.
The consultation will consider an extension of the rules into the private sector and will be published next year. With the livelihood of thousands of contingent workers under threat, contractors are advised to waste no time making their concerns heard.
VAT threshold to remain the same
The £85,000 VAT registration threshold will remain the same for the next two years from April 2018. The decision comes in response to a report by the Office of Tax Simplification, calling for a reduction to the threshold.
Government to consider Taylor Review recommendations
The Government is going to publish a discussion paper in response to the Taylor Review of Modern Working Practises, aiming to bring greater simplicity to employment status tests and tax. There are potential outcomes if the Taylor recommendations are acted upon, including:
- Alignment of tax law and employment status law, rendering IR35 outdated
- Increase in self-employment taxes
- Employment rights for contractors taxed as employees
- The introduction of ‘dependent contractor’ status
The Government has acknowledged the complexity of the issue, and has reassured stakeholders that it will work closely with them and carefully consider any possible changes.
Tax avoidance measures shift focus away from contractors
The bulk of the initiatives appear to be mainly targeting large corporations circumventing their tax liabilities using offshore structures. These measures could herald a change in focus for HMRC; zoning in more on larger avoidance cases, and possibly devoting less time to the easy pickings many contractors appear to represent.
Public investment could create contractor opportunities
A £44bn investment in the UK housing market could lead to opportunities for construction contractors. In his speech, the Chancellor noted that the fund aims to aid the development of 300,000 additional homes over each of the next five years.
The NHS will also benefit from an additional £6.3bn in funding, with £2.8bn ring-fenced for resource funding. This boost could benefit locums working for NHS trusts struggling to manage following the public sector IR35 reforms.