Private Sector IR35 Changes
The Chancellor didn’t mention any private sector IR35 changes in his Budget speech.
There had been leaks to the press that he has been considering making the same IR35 changes that he made in the public sector earlier this year to the public sector too.
When the Chancellor said nothing about this in his Budget speech Contractors thought that they had dodged a bullet.
Perhaps the petition which they hastily cobbled together which got more than the 10,000 signatures needed to bring it to the Government’s attention did the trick.
However these hopes were later cruelly dashed.
In the documentation published to go clarify the budget statement was the following:-
Off-payroll working in the private sector:-
“The government reformed the off-payroll working rules (known as IR35) for engagements in the public sector in April 2017.
“Early indications are that public sector compliance is increasing as a result, and therefore a possible next step would be to extend the reforms to the private sector, to ensure individuals who effectively work as employees are taxed as employees even if they choose to structure their work through a company.
“It is right that the government take account of the needs of businesses and individuals who would implement any change.
“Therefore the government will carefully consult on how to tackle non-compliance in the private sector, drawing on the experience of the public sector reforms, including through external research already commissioned by the government and due to be published in 2018.”
No Bullet Dodged for UK Contractors
So, UK contractors haven’t got away with it after all.
So it looks like the public sector IR35 changes will become private sector IR35 changes.
It’s only a consultation but it looks as if they have already decided to implement it.
The only question appears to be whether it is in April 2018 or the following year.
Freelancers Paying less Tax than Permanent Employees
The Chancellor and Prime Minister have both said that it is grossly unfair that “a self employed person earning £100,000 a year pays less tax than a permanent employee earning £100,000 a year.”
Much of what they do to contractors is aimed at righting that terrible wrong.
Of course, we all know that this is not comparing like with like.
However, it is likely that the big consultancies have implanted this idea into their heads.
Unfortunately freelancers representatives do not lobby Government as effectively as those companies do.
The big consultancies have always disliked contractors whom they see as rivals.
They would much prefer that companies hired recent graduates from them for over a grand a day rather than hire experienced contractors at half of that.
So, that’s why the Government want to roll out private sector IR35 changes too.
Vat Threshold Stays
In other news, the Chancellor has announced that he will not cut the VAT Threshold from £85,000. It will stay there for the next 2 years but he will consult about it beyond that.
There was a budget leak that said he would but he has not.
There must have been some resistance to it amongst Conservative backbenchers.
Slow Economic Growth
The Chancellor is predicting the economy to grow at between 1.3% to 1.6% a year up to the year 2022.
That’s way below the long term trend of around 3% a year.
So, it’s slow growth for the foreseeable future.
The higher rate tax threshold is to rise to £46,350 from April 2018.
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