Will there be any changes affecting contractors and self employed workers?
The thing about cliches is that while sometimes they contain a small nugget of truth other times they have laser-like accuracy.
One example is Harold Wilson’s much quoted aphorism that “a week is a long time in politics.”
In the case of the previous seven days, this is entirely justified.
The latest chancellor Jeremy Hunt, the fourth in four months, announced he was scrapping the planned partial reversal of IR35 reforms, along with most of the tax measures announced in late September.
So what has changed?
What is IR35?
For genuine independent contractors or anybody running their own personal services company (PSC), it’s back to the same status as September 22nd – nothing has changed.
The current IR35 or off-payroll working rules will remain in place where responsibility for compliance will rest with the end client (subject to some exceptions) or other UK resident person in the chain who processes payments to the PSC through which the individual worker provides the relevant services to the end client.
HM Treasury said that by keeping the 2017 and 2021 IR35 system reforms in place it will “cut the cost of the government’s growth plan by around £2 billion a year”.
Then Chancellor Kwasi Kwarteng told the House of Commons in his budget statement that these same reforms “imposed unnecessary cost and complexity” on businesses.
There might not have been many but in the intervening days some companies would have begun the work of signing contracts to start in April 2023 but will now have to be undertaken with different terms and conditions.
Some will be unable to proceed due to company policies that prevented clients from taking on the administrative burden and potential tax debt liability of engaging PSCs.
Chris Bryce, CEO of the Freelancer & Contractor Services Association, pointed out that, as we had already identified, that Prime Minister Liz Truss had only ever promised a review of the intermediaries legislation and that it was the chancellor who vowed to repeal the revisions of 2017 and 2021 – an act which, if it had proceeded, would have gone against existing tax policy making guidelines.
Nonetheless, Mr Bryce thinks the new chancellor has made the wrong decision. “The scrapping of the rollback of the 2017 and 2021 IR35 rules is disappointing.
“This will add to the confusion in the contractor marketplace and will do nothing to improve the agility and flexibility of contractors.”
What is happening with the rest of the legistlation?
Business owners and directors will be naturally concerned about any other changes that could affect them taking place or not depending on announcements made on television and in the House of Commons.
At time of writing the following measures that will still be enacted include:-
- A reversal of the 1.25% increase in National Insurance Contributions which will take effect from 6 November 2022
- The cancellation of the new Health and Social Care Levy which would have taken place in April 2023
- Tax reliefs applicable to companies moving to or operating in Investment Zones
In comparison, the list of measures that have been reversed since the mini budget will include:
- Income Tax
- The 45% top rate of income tax will remain in England, Wales and Northern Ireland. This measure does not apply in Scotland where Scottish income tax rates apply instead
- The proposed reduction of the basic rate of income tax from 20% to 19% due to apply from April 2023 has been postponed indefinitely or “until economic conditions allow for a change”
- The 1.25% increase in income tax rates charged on dividends which came into place in April 2022 will remain.
- Corporation Tax
- The increase in the main rate of Corporation Tax from 19% to 25% originally announced by Rishi Sunak will take effect from April 2023
Additionally VAT-free shopping for overseas visitors has been cancelled as has a freeze on alcohol duties.
Energy price guarantee for business
We’ve previously written about the energy price guarantee for businesses and consumers here but the main announcement yesterday was that support for consumers was brought into line with that offered to businesses.
The guarantee will now remain in place until April 2023 rather than for the initially announced two years. This will then see a Treasury review on what additional support can be offered for targeted businesses and individuals thought to be the most in need of support.
Shevaun Haviland, director general of the British Chambers of Commerce was scathing in his assessment.
He said: “The Chancellor’s buzzword was stability but what we’ve seen from him is a plan for today and nothing for tomorrow.
“Following the economic turmoil of the last few weeks he had to press the reset button. But businesses will be dismayed by the decision that looks set to strip back the energy support for firms from next April.
“This will be a hammer blow for many who were already worried about how they will survive.
“The government must commit to a full consultation with firms ahead of that cliff-edge to provide some certainty on where any targeted support will go. Energy costs keep business owners awake at night, alongside rising inflation and interest rates.
“Keeping support for the NICs reversal in place will be some relief for hard-pressed firms, but on its own will not be enough.”
For businesses worried about their energy bills in the coming months the news that the already announced support measures would remain is some comfort but as stated, many will be eyeing the territory after April 2023 warily.
The mid term statement and forecast from the Office of Budget Responsibility (OBR) is still due to take place on October 31st – the perfect day for horrible tricks – but the past few days and weeks should remind every business owners and director that while there is a lot that is in your control, there is more that isn’t.
This is why maximising your own influence and actions is critical to improving the chances of your company in the current turbulent economic times.
The time to get advice and take action is now
One easy decision you can take that could have a significant impact is arranging a free initial consultation with one of our expert advisors.
They will be able to offer insight, advice and suggestions on what options you have and decisions you can take to strengthen and protect your business, some immediately.
But they can only act when they take the first step and get in touch in the first instance.