Philip Hammond has delivered his second Budget as chancellor. Here are the key points of his speech.
IR35 reform in the private sector
Surprisingly the Chancellor’s speech did not mention IR35 or off-payroll at all so we were left to establish their plans from the red book (link – https://www.gov.uk/government/publications/autumn-budget-2017-documents). Here the Chancellor commits to a “careful consultation” on how to tackle IR35 non-compliance in the private sector. No timeframe is given, and it is just about possible to consult and implement legislative change from April 2018. However I think this is extremely unlikely given that they had the opportunity to announce the change for April 2018 and did not do so. (I believe that was their original plan, but that instead they have listened to wide-ranging lobbying by FCSA and others.) It is very positive that they have not simply bulldozed ahead. Representatives from HMRC’s policy team are attending our next members meeting on Friday 8 December, which will be our first opportunity to hear about their plans directly. If you would like to attend that meeting, please email me to book your place asap. Please note we are limiting attendance to one place per member firm.
Employment status & tax status
The red book also notes a commitment to explore options for longer term reform of status tests for employment rights and for tax purposes. This is partly driven in response to Matthew Taylor’s review, and also the increasing number of employment status cases hitting the headlines due to alleged false self -employment. Again this consultation is positive news – providing it is a meaningful process and that stakeholders’ views are properly considered in matters where they are more expert than the policymakers. Government recognises that this is an important and complex issue, so I hope that sufficient care will be taken to ensure properly thought through changes.
Before today’s budget there was rumour that the VAT threshold might be lowered, as a result of the recent OTS report (https://www.gov.uk/government/publications/ots-report-on-routes-to-simplification-for-vat-is-published) which suggests the UK threshold might be too high. However the Chancellor specifically stated he is not minded to reduce the threshold for two years because it has the advantage of keeping most small businesses out of VAT altogether. However he will be consulting on whether its design could better incentivise growth.
Subsistence benchmark scale rates
To reduce the burden on employers, from April 2019 they will no longer be required to check receipts when reimbursing employees using benchmark rates. This reduced admin burden is good news for PSCs.
- Income tax thresholds raised to £11,850 and £46,350 in April 2018
- NLW increasing to £7.83 from April 2018
- Stamp duty abolished for first time buyers purchasing up to £300k
- Annual borrowing £49.9bn this year, £8.4bn lower than forecast in March
- Rises in business rates to be linked with CPI rather than RPI
- Tax avoidance clampdown on multinational digital businesses ensuring that they pay VAT from April 2019
- Growth forecast for 2017 downgraded from 2% to 1.5%
- Annual rate of CPI to fall from peak of 3% towards 2% target later this year
- A further 600k people forecast to be in work by 2020