A quick round up of some highlights from the detail of todays budget speech.
Our budget newsletter will be emailed tomorrow with some of the other headlines that are well reported in the media, and are mainly post election give aways – jam tomorrow. This continues the theme of recent years that budget speeches are largely theatrical politics, and although the occasional technical change relevant to business is announced, for the most part these drip out on an ongoing basis or at/around autumn statement.
So changes to tax on savings, increase in personal allowances, reduction in fuel duty – watch your inbox tomorrow, if you haven’t already read it in the newspapers.
Here are some technical announcements that won’t be in the headlines. All references are to
Overview of Tax Legislation and Rates: March 2015
“2.26 Making taxes easier. The government will abolish the tax return for millions of individuals and small business through the introduction of digital tax accounts. A roadmap setting out the policy and administrative changes will be published later this year. In addition, the government will consult on a new payment process to support the use of digital tax accounts which allow tax and National Insurance contributions to be collected outside of Pay As You Earn and Self-Assessment, this will be legislated in the next Parliament.”
Whitefield comment: For millions of small businesses read sole traders. This will not affect limited companies, and even for individuals it’s a change in how Self Assessment is done, not what has to be reported.
As always, follow the money. HMT are putting weight behind this, so must see benefit to the Government:
~ faster tax collection
~ better and quicker information from, and control over, tax payers
~ ease of cracking down on abuse
~ “self service” cuts HMRC costs, backed up by stiffer non compliance penalties
It’s a lengthy consultation away, and with HMRCs recent record on major projects, eg RTI, there is potential for chaos.
As an accountant, I’m not losing sleep over loosing my livelihood from this.
“2.35. Pensions – lifetime allowance. Legislation will be introduced in the new Parliament to reduce the pensions lifetime allowance to £1million. Fixed and individual protection regimes will be introduced alongside the reduction in the lifetime allowance to protect savers who think they may be affected by this change. This change will have effect from 6 April 2016. Legislation will also provide for increases of the allowance in line with the consumer prices index I from 2018.”
Whitefield comment: with the recent de-regulation of Pensions regarding annuity rules, Pension investment has become a lot more attractive – this reduces the overall cap which is disappointing, but probably more favourable than a reduction in the £40k pa limit or the rate of tax relief given.
“2.36 Abolition of Class 2 National Insurance contributions (NICs). At Budget 2015 the government announced its intention to abolish Class 2 NICs in the next Parliament and reform Class 4 NICs to introduce a new benefit test. The government will consult on the detail and timing of these reforms later in 2015.”
Whitefield comment: only applies to sole traders and partners, not companies. A sensible tidying up, but doubtless it will be made complicated.
in the meantime from next year HMRC are no longer collecting Class 2 by direct debit, nor processing Small Earnings Exception – it will be administered through your Self Assessment, both payment and SEE.
“2.37 Employment intermediaries. The government will consult on detailed proposals to restrict tax relief for travel and subsistence, for workers engaged through an employment intermediary, such as an umbrella company or a personal service company, and under the supervision, direction and control of the end-user. This follows a discussion paper published shortly after Autumn Statement 2014 on Employment Intermediaries and travel and subsistence relief that furthered the government’s understanding of the issues. Any legislative changes would take effect from 6 April 2016 and would be legislated for in a future Finance Bill.”
Whitefield Comment: Basically this is IR35 on expenses, and a differentiation between “genuine self employment” and “Disguised employment” or whatever language gets chosen. Doubtless we will have to go five rounds to get the ground rules clear, and what will end up is little or no change for anyone outside of IR35, a restriction on expenses for anyone caught by IR35.
It’s a while off. We had a separate email from HMRC today:
“Thank you very much for taking the time to respond to the recent HMRC discussion document – Employment Intermediaries: Temporary workers – relief for travel and subsistence expenses.
“You may be aware, the Chancellor announced today as part of the Budget 2015; that the government will now consult on detailed proposals to restrict tax relief for travel and subsistence for workers engaged through an employment intermediary, such as an umbrella company or a personal service company, where that worker is under the supervision, direction and control of a third party.
“Any changes will take place after this full and formal consultation and would be intended to take effect from 6 April 2016 and legislated for in a future Finance Bill.
“The Chancellor also announced; the government wants employment intermediaries to provide workers with greater transparency on how they are employed and what they are being paid, with the Department of Business, Innovation and Skills consulting on proposals later this year.
“The proposals announced are different from those included in the discussion document released in December 2014 and reflect the feedback and evidence HMRC received in response to that document.
“The current proposal will remove workers’ entitlement to claim tax relief for travel and subsistence for their home to place of work where:
- the worker is supplied by an intermediary to a third party (an intermediary will include umbrella companies and personal service companies);
- the worker is broadly subject to direction and control by that third party.
“So somebody who broadly looks like an employee will not be entitled to relief whereas someone who looks like a self-employed worker will continue to be entitled to relief. This approach aligns with that taken for agency workers in the Finance Act 2014.
- HMRC will be consulting on the detail of the proposal over the summer.
- In addition BIS will be consulting on ways to ensure that workers who are provided to clients through an intermediary will have greater transparency on how they are employed and what they are being paid.”
All of the above is very embryonic, so if you have questions, ask your MP rather than us!