George Osborne, Chancellor of the Exchequer, announced this year’s budget on 20th March, addressing fuel, housing and economy. But what does it mean for contractors?
“As announced at Autumn Statement 2012, the Government will make a small amendment to the existing IR35 provisions to equalise the tax and NICs treatment of office holders, and put beyond doubt that the legislation applies to office holders for tax purposes (Finance Bill 2013).”
Unfortunately, not much was said about IR35 or the guidance around office holders, which has been eagerly awaited by many contractors during the 2013 Budget statement. However it looks promising that clarification may be provided in the Finance Bill, which is due on 28th March.
“At Budget 2013 the Government announces it will go further, and will reduce the main rate of corporation tax by an additional 1 percentage point in April 2015, so it will reach 20 per cent. In the process, the Government will unify the small proﬁts rate and the main rate so there is a single rate of corporation tax, simplifying the tax system.”
“The Government’s ambition is for the UK to be the best place in Europe to start, ﬁnance and grow a business. Small businesses report that costs of employment are one of the biggest barriers to success they face. Budget 2013 announces that from April 2014 every business and charity will be entitled to a £2,000 Employment Allowance towards their employer NICs bill.”
The incentive is to create more jobs and encourage small businesses to take on staff, so it is unlikely that many one-man-band contractors will be affected by the allowance.
“Budget 2013 announces that from April 2014 the personal allowance will rise to £10,000, meeting the Government’s objective one year early.”
This is expected to lift 2.7 million low income individuals under the age of 65 out of income tax altogether.
“Reduction in the Annual Allowance (AA) for pensions contributions – As announced at Autumn Statement 2012, the AA for pension savings will reduce from £50,000 to £40,000 for 2014-15 and subsequent years. (Finance Bill 2013)”
“The vast majority of individuals and businesses pay their fair share of tax. Budget 2013 takes action against those who do not by announcing a signiﬁcant crackdown on offshore tax evasion, tax avoidance and aggressive tax planning in four key areas:
The government is looking to introduce new legislation next year to tackle offshore tax evasion, and will introduce a GAAR (General Anti-Abuse Rule) in this year’s Finance Bill in a bid to tackle tax avoidance schemes.In addition to this, the government have agreed to enter tax information exchange agreements with the Isle of Man, Guernsey and Jersey, as well as removing the presumption of self-employment relationships through Limited Liability Partnership partners.
All of this is expected to raise £4.6 billion in new revenue over the next 5 years.
“In addition, the Government is acting to support investment in offshore oil and gas. At
Budget 2012, the Government committed to introducing a new contractual approach to provide
further certainty on decommissioning relief on the UK Continental Shelf. Following successful
consultation, Budget 2013 announces that contracts will be signed later in 2013,
providing the certainty needed to unlock billions of pounds of additional investment.”
Good news for the oil and gas industry, with further development in the area, contractor roles are expected to boom.
"Employer provided beneﬁts in kind: beneﬁcial loans – Legislation will be introduced in Finance Bill 2014 to increase the exempt threshold for the small loans exemption limit from £5,000 to £10,000. (Finance Bill 2014)”
This means the limit that a low cost/interest free loan becomes taxable will be £10,000 instead of £5,000 and employers will no longer be required to report details of loans where the outstanding balance is less that £10,000 throughout the tax year.
“Close company loans to participators – The Government will close three loopholes used to attempt to avoid the tax charge on loans from close companies to individuals with a share or interest in the company. This measure will have effect from 20 March 2013. (Finance Bill 2013)”
This means that a 25% tax charge will be made on loans made by a close company to a person who has a share or interest in a company, and is not repaid within 9 months after the end of the accounting period.