Busy Budget for contractors looms, tax firm shows

Contractors look set for a very busy Budget 2018, as more than half of a tax firm’s ‘watch-list’ for October 29th relates to areas affecting freelance or incorporated consultants.

Circulated yesterday, the list features 11 areas the chancellor is set to address in his Red Book, such as the Personal Allowance, Brexit, Corporation Tax and Tax Simplification.

Policy changes to these would impact contractors, but the list implies even greater scope for change in four additional contractor-centric areas; Employment Tax, MTD, Avoidance and CGT.

Blick Rothenberg, the list’s compiler, warns that people who work for themselves should “expect some significant rises” in taxation, partly in light of a social care bill that needs funding.

Specifically, the government’s decision not to abolish Class 2 NICs could be “setting the scene for increases in NIC -- perhaps particularly on the self-employed”, the tax firm warned.

Meanwhile, these taxpayers and others with VAT-registered business should have MTD’s introduction postponed, “for at least a year,” appealed Blick Rothenberg partner Alan Pierce.

The postponement should be announced at the Budget “especially” if the commencement of digital tax accounts is due to coincide with the UK “crashing out of the EU without a deal.”

Mr Pierce added: “[With potential] chaos resulting from Brexit, the last thing businesses need is the introduction of a new digital system for processing VAT returns just three days later.”

Such time pressures on companies also sit at the heart of the tax firm’s concern around new anti-avoidance measures, suggests another of the firm’s partners Fiona Fernie.

“Over the last few years HMRC have been given wider and wider powers and there has been no time for individuals and businesses to adjust to one measure before the next has been announced.”

So, she adds, the chancellor should “stop and take stock before announcing any further measures” to combat tax avoidance. Experts on IR35 are saying much the same.

Almost as usual a suspect for tightening at Budgets is Capital Gains Tax. And this year is no exception. “Entrepreneurs’ Relief may be targeted”, cautioned Blick Rothenberg’s Andrew Sanford.

“[Perhaps] by reducing the threshold from £10,000 to a lower amount. This would be concerning to many entrepreneurs and may act as a disincentive for further expansion.”