Autumn Statement 2015 Highlights
Many of our blogs during 2015 have focussed on such topics as tax relief for travel, serial tax avoiders and RTI. This years’ Autumn Statement encapsulated all of this, and much more, and following are the key highlights affecting Contractors:
Employment Intermediaries and Tax Relief for Travel and Subsistence
As announced earlier in the year, the government will legislate to restrict tax relief for travel and subsistence expenses for workers engaged through an employment intermediary, eg. an umbrella company or personal service company.
The charge will take effect from 6th April, and relief will be restricted for individuals working through personal service companies where the intermediaries legislation applies.
Office of Tax Simplification (OTS)
The government has accepted recommendations made by the OTS in their review of employment status. Details are expected to emerge in 2016, but is expected to give more certainty to contractors on short term assignments, by way of a “set de minimise level for payments to an individual who carries out some activities for a business, which would definitely not be an employment.”
In order to support businesses, the government will consider bringing forward legislation to amend the changes made in 2015 to Entrepreneurs Relief. This is good news to companies operating in commercial joint ventures, but it is not thought that the relaxation would be retrospective.
Salary Sacrifice and Benefits
The government is clearly nervous about the arrangements being made between employers and employees through salary sacrifice. It’s wariness could mark the demise of child care vouchers or pension contributions as part of your tax planning. The government will gather further advice ahead of taking any action,
Taxing Accommodation Benefits
Calculations on the taxation of employer-provided accommodation is currently complex. They are often performed incorrectly and leave employers exposed to interest penalties. The approach to this taxation is welcomed, providing it simplifies the process.
No Further RTI Relaxation
The government announced that the RTI relaxation is to be removed. All employers will therefore need to file FPS returns no later than the date salaries are paid in order to avoid penalties.
The government has announced the publication of a consultation on the rules concerning company distributions.
Changes to the transactions in securities provisions and the introduction of a targeted anti-avoidance rule which prevent the conversion of income into capital in order to gain a tax advantage will be contained in Finance Bill 2016.
With the increase in income tax rates on dividends coming into force in April 2016 (7.5% surcharge of dividends), it seems opportune to look at which transactions should be treated as distributions as there may be a greater incentive to convert income into capital gains.
Other forms of Anti-Avoidance
Anti-avoidance has been a hot topic all year, and the government has confirmed £800 million funding for additional work to tackle evasion and non-compliance in the tax system. Serial avoiders beware, as the government is also widening the Promoters of Tax Avoidance Schemes regime.
The government will also focus on disguised remuneration schemes, and announced the introduction of a new penalty of 605 of tax due to be charged in all cases successfully tackled by the ‘GAAR’.
Other HMRC Measures
Here are a few other measures announced by HMRC to be aware of as a contractor:
- HMRC Digitisation - digitisation of tax collection and increased investment to transform the system
- HMRC Streamlining - consolidation of it’s offices
- Simple Assessment - new, simpler process for self-assessment tax payers who have simple tax affairs
- Self-Assessment Cap - clarification around the time allowed for making a self-assessment (4 years from end of relevant tax year).