George Osborne, in his Autumn Statement, did not mention anything about the “leaked” proposals to refine IR35, neither did he indicate his plan to put Personal Service Companies (PSCs) on the payroll which the industry feared.
IPSE Chief Executive, Chris Bryce said: “The Government has rightly decided to take more time to reflect on any reform to this unwieldy and burdensome tax.”
What the Chancellor did confirm is the restriction of tax relief on travel and subsistence expenses for Personal Service Companies which will be implemented from 6 April 2016, something we already knew.
Paragraph 3.20, page 116 of the Spending Review and Autumn Statement says:
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 will have to wait until 9 December for the draft legislation which will detail the test to be carried out to decide a contractor’s employment status for tax purposes.
Moving on to tax avoidance, the Chancellor announced that everyone one will have digital tax accounts by the end of this parliament. If this government can digitize HMRC it will be a miracle in itself so we are waiting and watching for that.
The Chancellor did provide additional funding for tax avoidance measures and we should also make note of the following point from the Blue Book which could be a vague hint of actions to come:
Paragraph 3.25 Salary Sacrifice - The government remains concerned about the growth of salary sacrifice arrangements and is considering what action, if any, is necessary. The government will gather further evidence, including from employers, on salary sacrifice arrangements to inform its approach.
The government in the future Finance Bill will consider a legislation to close down any further new schemes intended to avoid tax on earned income, where necessary, with effect from 20 November 2015 (paragraph 3.87)
Seems like the government is buying some time before they announce any proposals for the contractors. Will have to wait until the next Finance Bill but whatever the outcome, contractors are here to stay!