As most readers will be aware, it was the annual “Autumn Statement” today – a half year budget update.
As the contents are dissected, one part stands out:
So today we set out in detail the largest package of measures to tackle tax avoidance, tax evasion, fraud and error so far this Parliament.
Together it will raise over £9 billion over the next five years.
We’re going to tackle the growth of intermediaries disguising employment as false self employment, depriving workforces of basic employment rights like the minimum wage in a bid to avoid employer national insurance.
We’ll halve the final period exemption for capital gains tax private residence relief. We will end the abuse of dual contracts, offshore oil and gas contracting, derivatives linked to profits and share buy backs.
And we will ensure the tax advantages of partnerships aren’t abused either.
We are introducing a new, limited power that requires people to pay upfront their taxes where the scheme they used has already been struck down by the courts.
So does this mean another crackdown of some sort on the Personal Service Company Sector and IR35?
Maybe, maybe not.
Over recent years there have been a plethora of increasingly exotic tax schemes launched to try and cut taxes on employment income, quite often by using contrived overseas structures or by contriving the employment status rules – this doesn’t only apply to typical knowledge based sectors where contracting is commonplace, but quite often further down the employment chain as well.
Its clear that the Government wants to restrict the more egregious schemes, and we already have proposals going through for removing tax advantages from offshore intermediaries, following on from crack downs on EBT and similar schemes, and a while ago Composites / Managed Service Companies.
So what about a typical Whitefield client operating via a Personal Service Company and concerned, as always, with IR35?
Probably – but you can never be sure – theres nothing new on the horizon, and theres no suggestion that this sector is going to be targeted in some way. The feeling in Government/HMRC seems to be IR35 is the tool for this sector, although there is a realisation that IR35 doesn’t always work well – the solution to that appears in their mind to be improving its working rather than replacing it.
We do know that IR35 compliance activity by HMRC has been both exceptionally low, and is going to increase (arguably it was so low, it couldn’t not increase).
So the conclusions, as always, seem to be “don’t panic, but don’t be complacent” – get the IR35 compliance and fundamentals right and there is probably little to be concerned about.