Following on from The Chancellor’s Summer Budget and Autumn Statement, new legislation has been drafted and is up for consultation. The draft legislation provides an overview of changes to tax law which the Government plans to introduce in Finance Bill 2016. The draft has provided more clarity on changes revealed in the Autumn Statement – Travel and Subsistence Relief for Contractors has been elucidated, however there is still no mention of IR35 reforms.
So, what will change for Contractors?
As expected, those caught by IR35 will have their Travel and Subsistence tax relief restricted – those outside IR35 will not be affected. Whilst this is good news for the majority of Contractors, it is important that all Limited Company Contractors determine their IR35 status for all contracts before starting a job. Those who trade via an Umbrella Company under Supervision, Direction or Control (SDC) of their client, will be affected by the restrictions. It’s estimated 430,000 Contractors will be affected.
IR35 reform was a topic on many Contractors minds pre Autumn Statement, and despite there being no announcement back in November, many speculated reforms would be drafted in the Finance Bill. There is however no mention of any IR35 reforms in the draft bill, putting many Contractors at ease. Despite there being no changes announced, it is still believed that IR35 is up for consultation, however we’d expect no changes until at least 2017.
Some other key issues that could affect Contractors:
- HMRC’s plans to go ahead with modernising tax administration will be put in to place – meaning any Contractors with self-employment status will need to submit their tax returns every quarter.
- Any Contractors who are using tax avoidance schemes will be clamped down on. A 60% of tax GAAR penalty has been confirmed for those using such schemes.
- There are no changes to the Dividend Tax hike that is set to come in to force in April 2016.
The draft Finance Bill 2016 is currently up for consultation. The consultation on draft clauses is intended to ensure that the legislation works as intended. The final contents of Finance Bill 2016 will be subject to confirmation at Budget 2016.
If you have any questions in relation to the legislation drafted in the Finance Bill 2016, and how it may affect you, give us a call on 0330 024 0406, our specialists are on hand to answer any queries you may have.
At Gorilla Accounting, we believe it is essential to have an accountant in the current situation. That is why we offer our all-inclusive accountancy package for just £85 + VAT per month. This includes our cloud accounting online software as well as a same day response if you contact us before 3pm. To find out more about the services we offer, get in touch on 0330 024 0406.
