Autumn Budget 2017: Contractor's Checklist

It’s Autumn Budget day and, as usual, the UK’s contracting community is waiting to see what the chancellor has in store, writes Shaun Critchley, managing director of contracting solutions provider ADVANCE. 

As I’ve outlined previously, there is plenty at stake for contractors. The contents of Philip Hammond’s red box have the ability to make or break Christmas for contractors, recruiters and service providers. 

Here’s a quick checklist of things to look out for today. 

• Private sector IR35 reform

The big one. Undoubtedly the topic that has attracted the lion’s share of the pre-Budget speculation in contracting circles, the extension of April’s IR35 reforms to the private sector would be huge news. Indeed, it arguably has the potential to be bigger than the introduction of IR35 itself back in 2000. Whether or not Mr Hammond will decide to take the plunge is a very tough one to call. An April 2018 implementation seems unlikely, but we could get some sort of announcement today, with a view to a 2019 or even 2020 rollout. 

VERDICT: Mention looking likely

LIKELIHOOD OF ACTION / ANNOUNCEMENT: 60%

• Taylor Review and the gig economy 

The ‘gig economy’ continues to hit the headlines, with Uber and Deliveroo both in the news in the run-up to Budget day. Though ‘gig’ working is different to traditional contracting, the introduction of a new ‘dependent contractor’ employment status -- as proposed by the Taylor Review -- would be significant. 

VERDICT: Expect a broad acceptance of the Taylor Review, with a possible consultation

LIKELIHOOD OF ACTION / ANNOUNCEMENT: 60%

• Pensions for the self-employed

The Taylor Review recommended auto-enrolment into pension schemes for the self-employed through self-assessment. Under this system, the automatic pension scheme would acquire 4% of a contractor’s income, unless they choose to opt out. We’re about to find out if the chancellor has taken this advice. 

VERDICT: Don’t bet against it 

LIKELIHOOD OF ACTION / ANNOUNCEMENT: 60%

• National Insurance contributions (NICs) for the self-employed

The chancellor’s first Budget of 2017 contained controversial proposals to increase Class 4 NICs from 9% to 11% by 2019, which the government abandoned following a public backlash. In the latest twist, the OECD (among others) is calling on Mr Hammond to revive the plan. Surely this politically vulnerable chancellor of a politically vulnerable government wouldn’t dare, would he? 

VERDICT: We should be safe

LIKELIHOOD OF ACTION / ANNOUNCEMENT: 30%

• VAT reform

A recent review of VAT by the OTS (Office of Tax Simplification) recommended a comprehensive review of the VAT threshold, with a view to reducing it from the current £85,000 level. IPSE, the Association of Independent Professionals and the Self Employed, has warned that lowering the threshold would be a “disaster.” Many limited company contractors reading this would no doubt agree.

VERDICT: Any change could be some way off

LIKELIHOOD OF ACTION / ANNOUNCEMENT: 50%

• Dividends

Further milking of shareholder dividends must be a tempting avenue for a chancellor hungry for additional tax revenue, representing as they do low-hanging fruit politically. Having been hit by both Osborne and Hammond in quick succession, however, there’s more than a fighting chance that dividends will get left alone today.

VERDICT: Don’t lose any sleep over this one (famous last words!)

LIKELIHOOD OF ACTION / ANNOUNCEMENT: 20%

• Corporation tax

In its pre-Budget submission to the chancellor, the British Chambers of Commerce (BCC) said corporation tax should remain at the current level of 19% until after the Brexit process has been completed, instead of being cut to 17% by 2020 as planned. Instead, the BCC wants Mr Hammond to provide relief from business rates. Personally, I expect that the chancellor will probably stick to his guns.

VERDICT: Significant change unlikely

LIKELIHOOD OF ACTION / ANNOUNCEMENT: 25%

• Anti-avoidance measures 

In light of the recent Paradise Papers revelations, it’s looking increasingly likely that the Budget will feature measures aimed at multinational companies, celebrities and the super-rich who use complex structures to protect their cash from higher taxes. One particular area of focus is likely to be the taxation of offshore trusts set up by ‘non-doms.’

VERDICT: As close as we’ll get to a dead cert

LIKELIHOOD OF ACTION / ANNOUNCEMENT: 80%

• Tax relief crackdown 

“Reliefs tend mostly to be used as intended, but governments view some as ‘imbalances in the tax system’ and regard use of them as avoidance — often after they cost more than originally expected.” So said a recent report by the Office for Budget Responsibility in reference to the UK’s estimated 1,100-plus tax reliefs. Expect an announcement in this area as the government seeks to close the so-called ‘tax gap.’

VERDICT: Signs point to reform

LIKELIHOOD OF ACTION / ANNOUNCEMENT: 70%

Editor's Note: Full analysis of Autumn Budget 2017 will follow on ContractorUK, both today and tomorrow.