Contractor sector unmoved by Spring Statement 2019
The quiet Spring Statement for contractors that their advisers were expecting has been officially delivered, with a Brexit-focussed Philip Hammond making no mention of IR35.
But by ‘leaving contractors alone’ – as an accountant wished on the eve of the statement, the chancellor did little for contractors, including not heading off a range of tax raids on their lot.
So it is “disappointing” that the off-payroll rules to reform IR35, which will impose IR35 status testing on firms, is going ahead, seemingly at odds with Mr Hammond’s ‘business-friendly’ claims in his speech to MPs in the House of Commons.
“Given the economic uncertainty resulting from Brexit chaos, you are left to wonder why the government is set on introducing further unnecessary IR35 reform”, Qdos Contractor added.
“[This reform is from a] chancellor [who] said [in his speech] the Conservatives will always be the party of…business.”
'Disappointed on IR35'
Contractor law firm Brookson Legal Services agrees. “We’re disappointed that the government missed an opportunity to remind businesses of this significant change [to IR35].
“[The chancellor should have] encouraged them to start preparing now for its 2020 implementation….as many are still in the dark”.
The firm’s managing director Joe Tully added that the absence of any reference to private sector IR35 reform, in either Mr Hammond’s speech or his statement, “won’t help matters.”
And although the chancellor hinted at it, the private sector is already “holding back on making decisions or investments” that are bound to impact contracting, warns SG Accounting.
So its managing director Daniel Mepham, who yesterday issued an alert to IR35-caught Scottish contractors, is the third adviser to believe Mr Hammond missed an important trick.
“The uncertainty of the Brexit situation at the moment is damaging to the economy” he said. “I wonder if there was a missed opportunity in this Spring Statement to ‘steady the ship.’”
Documents published next to the statement confirm that private sector IR35 reform is not the only tax raid still incoming for contractors, due to Mr Hammond not intervening in the sector.
“As announced in December 2010, the government will introduce legislation to target arrangements intended to disguise remuneration”, HM Treasury says in a new document.
“This includes legislation to ensure income tax applies to….third-party arrangements and a new charge on disguised remuneration loan balances outstanding at 05 April 2019.”
'Outrageous loan charge'
These statements, made in Tackling Tax Avoidance, Evasion and Other Forms of Non-Compliance, effectively reject pleas made in recent weeks to delay Loan Charge 2019.
“[There is, though, also] confirmation that HMRC's reply to criticisms of the outrageous loan charge will appear by the end of March,” said David Whiscombe, tax consultant for BKL.
Elsewhere at Spring Statement 2019, the government forges ahead with Making Tax Digital, signalling 1m businesses will need their VAT records to be MTD-compliant by April 1st.
'Government remains committed'
Spring Statement documents state: “Mandatory digital record keeping for VAT for businesses over the VAT threshold (with turnover over £85,000) comes into force from 1 April.
“This is an important first step in this modernisation of the tax system to which the government remains committed.”
One vocal campaigner on MTD, the Federation of Small Businesses, will be more heartened by another of the chancellor’s announcements which could also help contractors.
Specifically, Mr Hammond says large outfits will have to give responsibility for the supply chain via their outfit’s audit committee to a non-executive director, who will be required to log payment performance in their annual accounts, as the federation wanted.
'Small firms in great need'
“Poor payment practices by big businesses towards their smaller suppliers are rife and pernicious, leading to the closure of 50,000 small firms a year,” the FSB said.
Other Spring Statement 2019 announcements contractors will likely welcome include an official response to a call for evidence on simplifying the process of amending a tax return, and the launch of a strategy to give Britain a full-fibre broadband network by 2033.
“As expected, the Spring Statement has not added a lot of obvious significance to our sector,” said Graham Fisher, managing director of contractor accountants Orange Genie, which will be examining the finer details of the chancellor’s announcements in a webinar tomorrow evening.
He added: “There is a mention of the Apprenticeship Levy, but this merely confirms changes already announced, and is presumably a reminder that substantial funds remain unspent.”
'Failing Apprenticeship Levy'
The levy should have been reformed at Spring Statement according to both contractor group IPSE, and agency staffing body the REC, whose members place IT contractors. The body said:
“It is good news that the limited package of reforms to apprenticeships announced in the last Budget are to be brought forward.
“[But] we still need to have the debate about changing the failing apprenticeship levy policy into a flexible skills levy that really works for business and workers.”
Summing up the impact on contracting overall, Orange Genie issued a ‘no real surprise’ verdict, seemingly because with two future tax takes on contracting, the government looks resolute.
“Unsurprisingly,” the firm said, “we see no mention of a review of retrospective loan scheme charges and similarly, there is no further mention of IR35 in the private sector… [mainly due to the] publication of the consultation document last week.”