Spring Statement 2018: how contractors will fare
Contractors will be hoping that predictions of a non-event come true when the first Spring Statement is published in 13 days’ time – but a sting in the tail can’t be ruled out, writes ADVANCE managing director Shaun Critchley.
So the government will publish what its calling the inaugural ‘Spring Statement’ on Tuesday March 13th 2018.
Just to recap, under changes introduced by chancellor Philip Hammond there is now only one major fiscal event a year -- the Budget in the autumn.
The Treasury is keen to emphasise that, under the new fiscal calendar, the Spring Statement won’t be a mini-Budget. It’s even said that big policy announcements aren’t the intention.
It has also pointed out that switching the Budget from spring to autumn means tax changes will be announced well in advance of the start of the tax year, allowing sufficient time for consultation and awareness-raising.
A simpler system?
Underlining the break with tradition (or at least an intention to), a Treasury spokesman recently told reporters that the Spring Statement will last no more than 20 minutes, with “no red box, no official document, no spending increases (and) no tax changes.”
The fact that the statement will be delivered on a Tuesday, rather than in the primetime slot just after Prime Minister's Questions on a Wednesday, will also give it a lower profile.
As Mr Hammond put it when explaining the thinking behind the change back in 2016, “no other major economy makes hundreds of tax changes twice a year, and neither should we.”
‘Hear, hear’ contractors said at the time, mainly because it implies they’ll suffer one less ‘thumping’ a year.
It all rather begs the question though; what announcements, policy moves or proposals can contractors expect when Mr Hammond gets to his feet in under a fortnight’s time?
Forecasting the forecasts
The main focus will be on the state of the public finances, with the chancellor setting out the Treasury’s response to Office for Budget Responsibility (OBR) economic forecasts and providing updated figures.
This ‘big picture’ stuff may seem irrelevant to individual consultants, but the health of the economy will of course have a bearing on government tax policy, which will ultimately filter down to treatment of contractors, freelancers and the self-employed.
Bad news on the economy could be bad news for contractors who, as we all know from painful past experience, are often seen as easy targets by revenue-hungry ministers and mandarins.
Indeed, Mr Hammond has also indicated that he may use the Spring Statement to launch consultations on how to address “longer-term issues” and challenges in tax policy.
It seems to us that the chancellor has not forgotten about the caveat the Treasury inserted when outlining the new format of the Spring Statement, specifically that; “the government will retain the option to make changes to fiscal policy at the Spring Statement if the economic circumstances require it.”
It’s all enough to make contractors let out a groan in preparation of potentially more changes to come, because they’ve already endured a rather eventful start to 2018.
In fact, already this calendar year, on top of the ongoing reverberations from the April 2017 IR35 changes and two big public sector IR35 cases (one yet to be fully disclosed), contractors have been handed the government’s massive response to the Taylor Review.
In it, the Department for Business, Energy and Industrial Strategy (BEIS) embraces the sensible idea of regulation of umbrella companies and other intermediaries in the contracting supply chain.
This would actually be good news for contractors who work as umbrella employees, as it would make the task of choosing a compliant, professional, ethical provider easier.
Other key takeaways from the government response include the idea of a compulsory ‘key facts’ sheet for umbrella contractors, as part of a drive to increase transparency in what is a crowded and often confusing market.
As evidenced by the recent Unite employment tribunal case, choosing the wrong provider is a recipe for disaster. So anything that empowers contractors and enables informed decision-making, whether they are choosing an umbrella company or contractor accountant, should be welcomed.
However, these measures agreed on by the government in response to the Taylor Review are part of a longer-term policy agenda designed to address perceived imbalances and unfairness in the labour market.
It’s therefore extremely unlikely that we’ll see any further Taylor Review-related announcements on the 13th -- not least because the main consultation documents are open for responses until May 23rd. My hunch is that we’ll have to wait several months to hear anything more.
IR35 private sector rollout: the saga continues
It’s possible that the government may decide to publish its much-anticipated consultation on extending last year’s IR35 reforms to the private sector on or around Spring Statement day.
The consultation was expected early this year, so we surely don’t have much longer to wait to find out HMRC’s thinking.
As I’ve written previously, it increasingly looks like a question of ‘when’ rather than ‘if’ we see a private sector rollout.
HMRC, buoyed by its recent success in the Christa Ackroyd case, will now be in a position to argue that it has ‘proof of concept’ in terms of implementation and evidence of increased tax take in the public sector. This could very likely form the foundation of its case for a private sector rollout.
Unfortunately, the only two real questions remaining are –
-- When will the government aim for implementation (April 2019 still seems the most reasonable bet)? And;
-- Will any amount of lobbying succeed in forcing a re-think?
There is a case to be made that, rather than shifting responsibility and liability through the supply chain, HMRC’s time would be better spent simplifying IR35 itself so that contractors, agencies, end-clients and service providers know where they stand. We shouldn’t hold our breath though for a U-turn this bold on the13th.
Spring Statement 2018: no news will be good news
My sense, as is unfortunately always the case before most fiscal events these days, is that the best contractors can hope for is a dull Spring Statement. Contractors won’t want to become the lightning rods that Mr Hammond picks up to absorb any financial shocks that he may reveal have hit, potentially from Brexit.
So the contracting sector will be hoping, probably for the first time in a while, that the Treasury and the chancellor keep to their word. No big announcements, no major plans and, crucially for a sector already in negative territory, no new anti-contractor policies, please..
We calculate that the chances of Mr Hammond’s first Spring Statement speech passing without incident are good, but as ever contractors should be on guard and ready to expect the unexpected.