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Focused on the Autumn Budget 17

Chancellor Philip Hammond made a positive statement about the state of the UK economy in his Autumn Budget, although most in the press focused on the reduction in the growth forecast.  He did however point to high employment levels, decreasing debt and opportunities for UK business, and the various measures to be introduced to assist home building should be good news for those in the construction sector.

In terms of matters specifically affecting the recruitment sector, he confirmed that the much speculated extension of the off-payroll legislation into the Private Sector, was under consideration.

There was a lot of speculation that this change would take place in April 2018 but as the government have announced they are going to consult with the various stakeholders, it is therefore unlikely to happen until April 2019 at the earliest.

‘Off-payroll working in the private sector’

The government reformed the off-payroll working rules (known as IR35) for engagements in the public sector in April 2017. Early indications are that public sector compliance is increasing as a result, and therefore a possible next step would be to extend the reforms to the private sector, to ensure individuals who effectively work as employees are taxed as employees even if they choose to structure their work through a company. It is right that the government take account of the needs of businesses and individuals who would implement any change. Therefore the government will carefully consult on how to tackle non-compliance in the private sector, drawing on the experience of the public sector reforms, including through external research already commissioned by the government and due to be published in 2018’.

It is hoped that the Government will listen to the various stakeholders during the consultation, however when the rules were introduced in the Public Sector the feedback was almost universally negative yet the Government have still pushed ahead regardless of the concerns.

The Chancellor also announced that the Government will look at modern employment practices in general. This is something that many in the industry have pushed for as working practices have changed dramatically and tax and employment laws have not been able to keep up. Hopefully this means that the Government will not introduce tax changes without considering all the consequences and in particular the feedback from the public sector.

Employment status discussion paper

The government will publish a discussion paper as part of the response to Matthew Taylor’s review of employment practices in the modern economy, exploring the case and options for longer-term reform to make the employment status tests for both employment rights and tax clearer. The government recognises that this is an important and complex issue, and so will work with stakeholders to ensure that any potential changes are considered carefully.

The Chancellor also restated the Government’s commitment to closing down tax avoidance schemes (some of which are used by contractors). This should raise £4.8 billion for the Treasury. HMRC has already highlighted a number of schemes in their spotlight feature, such as offshore loan schemes and jobs board schemes.

Other measures that are likely to affect your contractors include:

  • The Income Tax Personal Allowance increases to £11,850 for the next tax year beginning on 6 April 2018. At the same time the basic rate tax limit increases to £34,500 (contractors living in Scotland will have to wait for the Scottish Parliament to set this threshold for them). This is designed to help lower paid workers;
  • National Living Wage is being increased from £7.50 to £7.83 for those 25 and older and to £7.38 for 21 to 24 year olds.
  • In an encouragement to users of environmentally-friendly electric and hybrid cars there will be no taxable benefits on employees using a workplace charging point;
  • There is an increase of inflation +2% on tobacco products but no change in the duty on wines, beers and spirits; the Chancellor made it clear he wanted to support small pubs!
  • Despite much speculation in the financial press the Chancellor decided not to change the VAT registration threshold which will remain at £85,000;
  • As well as outlining various incentives, investments and interventions to energise house building, changes to Stamp Duty grabbed most of the headlines. First time buyers will be exempt from paying Stamp Duty on homes costing less than £300,000. For London first time buyers the first £300,000 of the cost of a £500,000 purchase will be exempt with the remaining £200,000 charged at 5%.

The Chancellor also announced that various consultations will take place during 2018 on a wide range of financial and taxation issues, we will keep you informed as and when more information about them is published.

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