The Autumn Statement can sometimes be a bit of a non-event with most of the significant tax changes announced in the Budget Statement earlier in the year.
This year had the potential to be very different! Recruiters who place contractors were especially interested to hear what the Chancellor had to say in his speech last Wednesday, after a whole string of rumours and predictions in the build up to the statement.
What was expected?
Some commentators were predicting an Armageddon situation for the contractor industry, mainly fuelled by articles from two major newspapers.
The Guardian and the Daily Mail both published articles detailing how the government would crackdown on IR35 by forcing contractors on to the payroll of the end client after just one month. This would have had a devastating impact on contractors and the recruiters who place them.
The government had already held a consultation on its plans to restrict the ability of contractors to claim tax relief on their travel and subsistence (T&S) expenses. This provoked a strong reaction from the industry and various trade bodies such as APSCO and the FCSA who felt that the proposed changes were unjust.
It was expected that the government would provide much needed clarification on both IR35 and the travel and subsistence rules in this Autumn Statement.
What was actually announced?
After George Osborne had delivered his speech many were left scratching their heads as there was not a single mention of IR35 or the restriction of travel and subsistence (T&S) expenses.
As is often the case though, the devil was in the detail and a thorough review of the published guidance did in fact provide some clarification on the planned T&S rules.
The government have confirmed that relief for T&S expenses will be restricted for those working through Umbrella companies or those operating via their own Limited Companies (PSC’s) where they are caught by the IR35 rules. This is effective from 6th April 2016.
There was no mention whatsoever of IR35 even in the detailed statement document. This shouldn’t be seen as an indicator the government will leave this alone though. In fact a government source confirmed that IR35 still remains on the agenda and we await the response from this consultation to provide some much needed clarification.
What is clear is that it is very unlikely that any new rules surrounding IR35 will be effective from 6th April 2016.
The government also announced a whole array of large spending projects from increased funding to the NHS and police to various infrastructure projects, all of which should be good news for recruiters working in these areas.
What should we do about these changes?
The government are due to publish the Finance Bill on 9th December 2015 which should provide the draft legislation for the proposed T&S changes.
Further clarification regarding IR35 is expected later this year or early next year.
It is critical for contractor recruiters to be aware of the changes in the industry that will impact their candidates, as they are likely to come to you in the first instance for guidance.
It is clear the government has the contractor industry in their sights, making compliance for recruiters and those in the supply chain of contractor workers, absolutely key to long term stability.
The T&S changes will see many contractors reconsidering their situation and many using Umbrella Companies may look to switch to a Limited Company (PSC). We would recommend you use this opportunity to review your Preferred Supplier List (PSL) and ensure you have both Umbrella Companies and Contractor Accountants on the list and that they adhere to the highest level of compliance.
There are various trade bodies, such as the Freelancer & Contractor Services Association (FCSA), who can provide you with readymade PSL’s in the form of their compliant members.
Compliance is more important than ever, our advice would be to follow the upcoming changes closely and then seek expert accounting advice on how best to help your contractor clients through this potentially tricky period.