It’s that time of year when the Chancellor of the Exchequer emerges to bring us the Autumn Statement, which outlines the government’s plans for the economy.
This will be the new Chancellor Philip Hammond’s first Autumn Statement following George Osborne’s resignation. It’s also an important one as it will provide a glimpse into the future of Britain’s economy following the EU referendum result.
The purpose of the Autumn Statement is to provide individuals and businesses with advance notice of imminent legislation changes which could come into effect as soon as the beginning of the new tax year on 6th April. The Autumn Statement also delivers the Office for Budget Responsibility’s annual update on the UK’s public finances and the economy. It takes place on Wednesday, 23rd November at around 12:30 PM at Parliament.
We give you a preview of topics that may be discussed in the Autumn Statement, particularly those which may have an effect on contractors and freelancers. Continue below for an infographic and preview of what could be discussed in the Autumn Statement:
Brexit will undoubtedly be a key topic of discussion this year, and there will likely be a report on the state of the economy since the EU referendum result, as well as a mapping out of future plans to navigate Brexit while keeping the economy and Sterling in check.
Recent figures show that Britain’s economy actually grew by 0.5% in the three months following the referendum, however it is unknown what the future may hold; there is hope that the Autumn Statement will shed light on this.
Philip Hammond has allegedly indicated that he won’t be cutting Corporation Tax down to 15%, contrary to one of George Osborne’s final plans in wake of the Brexit vote. Osborne’s intention was to slash Corporation Tax to boost the economy and encourage global companies to set up in the UK despite Britain leaving the EU.
George Osborne had previously put into action a plan to reduce Corporation Tax to 17% by 2020. This appears to be going ahead as planned.
Hammond was quoted: “At 20 per cent, we have a highly competitive Corporation Tax rate. And as it falls to 17 per cent over the next three years, it will be more attractive still.”
Corporation Tax currently sits at 20% and must be paid by all companies in the UK. For contractors and freelancers with a registered limited company, cuts in Corporation Tax could be beneficial as it decreases tax bills, thereby increasing take home pay.
Tax avoidance schemes
It was announced in George Osborne’s March Budget that there could be a new penalty for those who promote aggressive tax avoidance schemes.
Some tax avoidance schemes include offshore schemes, loans and other models. While these methods are not illegal (unlike tax evasion schemes), and promise contractors a higher take home, the schemes usually fail and make the contractor liable for taxes and penalties to HMRC.
The government issued a consultation in August 2016 discussing the possible introduction of a penalty for those who design, market or facilitate the use of tax avoidance schemes that are defeated by HMRC. This would apply to offshore tax avoidance schemes.
The consultation finished on 12th October 2016, and while feedback is still being analysed, it’s possible that initial findings could be discussed in the Autumn Statement.
IR35 for public sector contractors
The government published a consultation in May addressing potential reform of IR35 legislation for public sector workers. Industries that may have public sector workers include public administration, education, the NHS, etc.
In this case, IR35 would apply where contractors and freelancers in the public sector who are working via a Personal Service Company, or limited company, are deemed not to be genuinely self-employed; this is called being inside IR35.
The consultation sought feedback from businesses and individuals to determine if IR35 should be adjusted to make it the responsibility of the intermediary – the contractor’s agency, the public sector body or another third party – to deduct the relevant tax and National Insurance from the contractor at source.
The consultation ended mid-August 2016, and there is a possibility that Hammond will address the results and any plans for legislation moving forward. If new laws are put into place, they will be in effect from April 2017.
Sources suspect that the new Chancellor will announce further spending and investment to improve Britain’s transport infrastructure, including rail and road networks. The Bank of England’s stimulus package has influenced the cost of borrowing in a positive way, and both Hammond and the Prime Minister, Theresa May, have suggested that the original plans to reach a Budget surplus by 2020 will not be going ahead on schedule.
Instead, Hammond has hinted at investment in strategic infrastructure projects that will improve Britain’s roads and railways, which will, in turn, create thousands of jobs for construction contractors and freelancers.
The above are just a few of the many topics that could be discussed in this year’s Autumn Statement, amidst much speculation surrounding potential tax cuts and economic stimulus.