Finance Bill 2016
So, how will UK contractors be affected by Chancellor George Osborne’s Finance Bill 2016, the details of which he will announce on Wednesday afternoon?
UK contractors felt that they dodged a bullet in the Chancellor’s Autumn statement a couple of weeks ago.
Chancellor’s Leaks and Rumours affecting Contractors
Prior to that there had been statements from the Chancellor, leaks and rumours that:-
- He would take away the right of both umbrella company and personal service company contractors to be able to offset travel and subsistence expenses against tax.
- He would force clients, who hired contractors for more than a month, i.e. virtually all contractors, to take those contractors onto their payroll. He called these contractors off payroll employees – which shows what he really thinks of them
- He, with HMRC, was devising a new online IR35 test. Clients would make contractors sit this new online IR35 test. If they passed it they could operate as normal as contractors. If they failed it they would have to go on the client company’s payroll. HMRC would also keep the results of failed online tests for future reference
Chancellor Osborne’s Autumn Statement
When the Chancellor read his Autumn Statement, most of these were missing.
The only one that was there was only partially there.
He would still stop contractors who are caught by the Intermediaries legislation (IR35), i.e. umbrella company contractors, from offsetting travel and subsistence expenses against tax.
However, those not caught by IR35, i.e. personal service company contractors, would still be able to offset travel and subsistence expenses against tax.
Chancellor Finds Extra Tax
In a press release, IPSE (ex-PCG) claimed that as a great victory for they, and their members, lobbying efforts beforehand.
This may be true. However, another factor could have been that the Treasury suddenly found an extra £27 billion in tax receipts, which they would get in the next year, meaning that the Chancellor needed less tax money.
This, and the Lords defeat, may have been why the Chancellor changed his mind on Tax Credits.
It may, also, be a reason why he pulled back out the triple threat above.
However, there is a third possibility.
Anti-Contractor Measures in Finance Bill
That is that he is going to introduce the measure in his Finance Bill which he will produce on December 9th.
Contractors are not out of the woods, or murky water, yet.
It would seem unlikely that the Chancellor will stop personal service company contractors claiming travel and subsistence expenses against tax after saying he wouldn’t a couple of weeks earlier.
Umbrella Company Threat
However, there may be some truth in he second and third threats, i.e. forcing contractors caught by IR35 onto a client company’s payroll rather than using an umbrella company.
That would be an existential threat to umbrella companies.
He may use the Finance Bill 2016 to announce this measure and may use it to announce a new IR35 test which has legal bearing as well.
The life of UK contractors, since IR35 was brought in, has been a constant worry.
December 9th is the next date for contractors to worry about.