The Autumn Budget 2018 | An Overview
Phillip Hammond, the Chancellor of the Exchequer, delivered his second ‘Autumn Budget’ this Monday which included a number of giveaways, a number of ‘holds’ where an increase may have been expected and a number of measures which allows the Government to argue it is taking a tough stance on tax avoidance. A number of ‘difficult’ issues or those which could have generated negative headlines were largely not addressed.
The big news for the recruitment industry was of course confirmation that the off-payroll working rules are to be extended to the private sector from April 2020. These rules have been in force for the public sector since April 2017 and following the recent consultation ‘fact sheet’ which declared the public-sector roll-out a huge success, it was perhaps inevitable they would also be introduced to the private sector.
Morson added its voice to those of many stakeholders advising the Government that an introduction in 2019 would not give businesses time to prepare, so the pushback to April 2020 is a small win in that respect. The Government also announced that the rules will only apply to ‘large and medium-sized’ businesses, perhaps a nod to the reality that the introduction in the public sector was not as smooth as HMRC expected. Again, this represents a small win. We await final legislation which will confirm whether the responsibilities for the IR35 decision and the liability for any tax due remain the same.
A comment also on the changes to VAT in the construction sector which has not generated many headlines but could represent a significant admin burden if not managed properly. Legislation will be published alongside Finance Bill 2018-19 to provide for a ‘VAT reverse charge’ on building and construction services, due to come into effect on 1 October 2019. If labour services are caught, intermediaries will in effect become responsible for collecting VAT on behalf of their construction contractors and must make sure not to include VAT in payments to impacted workers. We await final legislation here which will confirm the details, but it is expected that the rules will apply where work is deemed caught by CIS.
Some of the other key points include:
- Personal allowance increased to £12.5k, a year earlier than planned
- Higher rate threshold increased to £50k, a year earlier than planned
- National living wage increased to £8.21 a year from April 2019
- Increases in allowances to companies for certain capital spending
- Additional £20.5bn to NHS over the next 5 years
- Extra £400m to schools for ‘little extras’
- Additional £700m for local councils for social care
- Pothole fund to help repair damaged roads
- VAT threshold of £85k/year will not be reduced until 2022 at the earliest
- Confirmation that abolition of class 2 NICs will no longer go ahead
- No rises in fuel duty, or duties on beers, cider and spirits
Enforcement/ Anti-avoidance measures
- Digital service tax of 2% on UK revenue of big tech companies, from April 2020 – very light on detail but no doubt intended to counter negative headlines around lack of action on Apple, Amazon, Facebook et al’s perceived aggressive tax planning
- Return of HMRC as a “preferential creditor” – meaning the taxman is “bumped up” the repayment queue in the event that taxpayers enter liquidation
- Rules to shift tax liabilities to Directors where companies are intentionally placed into insolvency
- Various offshore anti-avoidance measures
It was notable that there was no mention of the Taylor Review or the gig economy in the budget documents, perhaps a surprise given that the Government consultations closed almost six months ago.
The Chancellor warned that a further Budget may be required depending on the outcome of the Brexit negotiations.