Although yesterday’s Budget speech may have been short on detail, HMRC’s website contained 107 Budget Notes amounting to 270 pages. Amongst the detailed technical material there was surprisingly no reference to the final version of the income shifting legislation which had been widely anticipated. This was because it was hidden away in Press Notice 3 and Chapter 4 of the Economic and Fiscal Strategy Report on the HM Treasury website. The following commentary summarises the issues of significance to PayStream’s customers:

The good news on income shifting

Following the extensive industry wide representations as part of the consultation process on income shifting, the Government acknowledges that a further period of consultation is required to ensure that the legislation in this area provides clarity and certainty for businesses and their advisers. It now intends to introduce legislation in Finance Act 2009 and will not enact legislation with effect from 6 April 2008.

The bad news for disreputable umbrella providers and their expense procedures

At the same time the Government indicated its concern at the increasing use of umbrella company arrangements and overarching contracts of employment as a means of obtaining tax relief, specifically travel to work expenses, that would not be available to other workers. The Government will monitor the use of such arrangements and, if necessary, consider action in the future.

We may expect to see some proposed legislation regarding travel to work expenses in the Pre Budget speech in December. Here at PayStream we are committed to working with Treasury, HMRC and our advisers to ensure that our services are fully compliant with all aspects of the legislation and to make appropriate representations on legislative developments.

A reminder

In the Pre Budget report back in October 2007, the Chancellor announced the rate of Corporation Tax payable by small companies would increase to 21% in 2008/9.