Is ‘off-payroll’ for all inevitable?

Chancellor deliberates on whether to extend ‘off-payroll’ rules to private sector

Despite the strong rumours that the Autumn Budget would herald the extension of the ‘off-payroll’ rules to the private sector, rather than making a firm announcement that this would happen, the government has instead made a veiled proclamation that this is likely to happen.

Having listened to HMRC’s rhetoric that the early indications are that public sector compliance is increasing as a result of the new rules introduced this April, a possible next step is for the government to extend them to the private sector. However, the government is keen to assure the contracting community that they will take account of the needs of businesses and individuals whom the changes would affect. With this in mind the government will carefully consult on how to tackle perceived non-compliance in the private sector, drawing on the experience of the public sector reforms, including through external research already commissioned by the government and due to be published next year.

It is a tried and tested tactic of the government to launch a cosmetic consultation when all the time the matter is a fait accompli, and this appears to have all the hallmarks of a done deal. If the government are so convinced that the public sector IR35 reforms are a success then why wouldn’t they wheel them out into the private sector?

Employment status discussion paper

In part response to Matthew Taylor’s review of employment practices in the modern economy, exploring the case and options for longer-term reform to make the employment status tests for both employment rights and tax clearer, the government will publish a discussion paper. As this is an important and complex issue, any potential changes will be considered carefully.

VAT registration threshold

Thankfully the pre-Budget speculation that the Chancellor may be tempted to reduce the threshold at which point businesses must compulsory register for VAT were proven wrong. The current threshold of £85,000 will remain in place for two years from April 2018.

In response to the Office of Tax Simplification’s recent recommendations, the government will consult on the design of the registration threshold.

Other points of interest

Personal allowance and thresholds

From 6th April 2018 there will be increases in the personal allowance and higher rate threshold to £11,850 and £46,350 respectively. This means that in 2018/19, a typical taxpayer will pay £1,075 less tax than they did in 2010/11.

Employee business expenses

Following the call for evidence in March 2017, several changes are to be made to the taxation of employee expenses, in particular:

• Subsistence benchmark scale rates – To reduce the burden on employers, from April 2019 they will no longer be required to check receipts when reimbursing employees for subsistence when using benchmark scale rates. The existing concessionary accommodation and subsistence overseas scale rates will be placed on a statutory basis, to provide greater certainty for businesses.
• Guidance and claims process for employee expenses – HMRC will work with third parties to improve the guidance on employee expenses, particularly on travel and subsistence and the process for claiming tax relief on non-reimbursed employment expenses.
• Self-funded training – There will be a consultation in 2018 on extending the scope of tax relief currently available to employees and the self-employed for work-related training costs.

Benefits-in-kind:  electric vehicles and company cars

From April 2018, there will be no taxable benefit on electricity that employers provide to charge employees’ electric vehicles.

Fuel and van benefit charges will both increase by RPI from 6th April 2018.

Rent-a-room relief

Owner-occupiers and tenants who let furnished rooms in their only or main residence do not have to pay tax on the rents they receive provided the gross income does not exceed £7,500 p.a. A call for evidence is to be published to establish how rent-a-room relief is used and ensure it is better targeted at longer-term lettings.

Mileage rates for landlords

Individuals with property businesses will be given the option of calculating their travel expenses by reference to mileage rates so as to reduce their administrative burdens.

Late submission penalties and late payment interest

The penalty system for late or missing tax returns is to be reformed by adopting a new points-based approach. There will be a consultation on whether to simplify and harmonise penalties and interest due on late payment and repayments with a view to making the system fairer, simpler and effective across different taxes.

Faster recovery of Self-Assessment debt

HMRC will use new technology to recover additional Self-Assessment debts closer to real time by adjusting the tax codes of individuals with PAYE income. These changes will be effective from 6th April 2019.

Corporate gains

Companies making disposals of assets are currently allowed to deduct from the sale price indexation allowance. The allowance is applied to the cost and other associated expenditure and takes into account the increase in the retail prices index between the month the expenditure was incurred and the month of disposal of the asset.

To bring the UK in line with other major economies and broaden the tax base through removing relief for inflation that is not available elsewhere in the tax system, the corporate indexation allowance will be frozen from 1st January 2018. As such, no relief will be available for inflation accruing after this date in calculating chargeable gains made by companies.

Capital Gains Tax payment window

The introduction of the 30 day payment window between a capital gain arising on a residential property and payment will be deferred until April 2020.