As is customary with Autumn Statements the Chancellor set the scene by talking about the state of the economy (one of the world's fastest growing), public spending (significant investments in roads, rail and housing required), employment (highest for many years) and borrowing (higher than forecast).
He then proceeded to set out his plans for the future:
Contractor Specific Measures:
IR35 in the public sector - Previously announced IR35 changes for the public sector are set to go ahead in 2017 as planned. This is disappointing particularly since just about everyone consulted said it was a bad idea, not least because it will be very difficult for end clients and agencies to understand and implement.
HMRC have said that the new online IR35 tool will help end clients and agencies to make a decision but the cynics will say that it will simply indicate that either everyone is caught or it does not have sufficient information to make a decision. In which case, contractors will need to get an IR35 review done in order to challenge the decision. This is something PayStream can help with.
5% allowance (IR35 changes) - For those caught by IR35 the Government has removed the 5% tax free allowance to cover administrative expenses. This will increase the tax that those caught will pay.
VAT flat rate scheme - A new 16.5% VAT rate will be introduced from April 2017 for businesses with limited costs, such as labour-only businesses. This will reduce take home pay for many contractors though a PSC will still be much more tax efficient than PAYE.
Penalties for “enablers” of tax avoidance schemes - The Chancellor announced more HMRC powers and penalties to tackle those involved in tax avoidance in all its forms including a clampdown on disguised earnings through self-employment.
The penalties are meant to deter enablers or promoters of tax avoidance schemes. This is consistent with HMRC' recent focus on contractor loan schemes, EBTs and other offshore schemes. Contractors who used those schemes are now getting bills for tax years five or six years ago.
Consultation on fairer tax for people doing similar roles - In his speech the Chancellor mentioned a fairer society and that people working alongside each other in similar roles should be paying the same tax. No detail was given but the concern is that this could pre-empt another attacks on the self-employed.
Other announcements included:
A lot of the detail (including draft legislation) relating to these announcements will not be issued until 5 December at the earliest so we will update you again in a couple of weeks.
You can download the complete Autumn Statement 2016 here.