2017 Autumn Budget – key points
Last week Phillip Hammond delivered his 2017 Autumn Budget. Unlike the last Budget the chancellor managed to side-step controversy and the 2017 Autumn Budget didn’t include any dramatic changes.
As with previous posts, we'll concentrate on those points in the 2017 Autumn Budget which are likely to affect you if you’re a contractor, freelancer, run a hi-tech/online business, or a small limited company.
2017 Autumn Budget: IR35
Just to recap IR35 is legislation that aims to ensure that individuals who effectively work as employees are taxed as employees even if they choose to structure their work through a company.
Many of you may be aware of the changes to IR35 which came in from 6th April 2017.
As a recap, within the public sector, the criteria for determining whether IR35 applies hasn’t altered - it’s the responsibility for who implements it which has changed. This now lies with the public sector body, rather than the agency which engages contractors on their behalf.
Judging by the conversations we've had with our clients since 6 April 2017 (when the new rules were introduced), there appears to be widespread angst and confusion amongst public sector bodies about how to implement these changes in practice.
Many public sector bodies have relied on HMRC's employment status tool,which, whilst updated, is still flawed. In particular, it fails to recognise mutuality of obligation. This is a key factor in determining an individual’s employment status.
There has been speculation that these rules will be extended and applied to the private sector. Fortunately with the 2017 Autumn Budget the government appear to have adopted a more pragmatic approach. They will consult in 2018 on how to tackle non-compliance with IR35 in the private sector, rather than introduce legislation with immediate effect.
2017 Autumn Budget: Research and Development
A number of new measures have been announced in the 2017 Autumn Budget to support business investment in Research and Development which includes:
- Increasing the rate of the R&D expenditure credit which applies to the large company scheme from 11% to 12% where expenditure is incurred on or after 1 January 2018
- A pilot for a new advanced clearance service with HMRC for R&D expenditure credit claims to provide a pre-filing agreement for three years
- A campaign to increase awareness of eligibility for R&D tax credits among small businesses
- Working with businesses that are developing and using key emerging technologies to ensure that there are no barriers to them claiming R&D tax credits.
These changes introduced in the 2017 Autumn Budget are best described as helpful, rather than radical. However, given how vital cash flow is for start-up businesses in the tech sector these changes are welcome.
2017 Autumn Budget: EIS changes – Knowledge Intensive companies
Again, another tacit acknowledgement of the importance of the technology sector in the UK economy is the government consultation which proposes that new Knowledge Intensive EIS companies will be allowed a longer period to use any capital raised in their business.
Additionally, from 6 April 2018 the following changes are proposed in order to encourage investment in Knowledge Intensive companies:
- The maximum annual EIS investment for an individual is increased to £2 million (from £1 million) provided at least £1 million is invested in Knowledge Intensive companies
- Knowledge Intensive companies will be able raise a maximum investment of £10 million in a tax year (currently the maximum investment is £5 million for other EIS qualifying companies)
- The maximum lifetime limit for EIS investment will be increased to £20 million for Knowledge Intensive companies (currently it is £12 million for other EIS qualifying companies).
- Companies must raise their first investment under EIS within 7 years of making their first commercial sale - though this is extended to 10 years if the company is a knowledge-intensive company.
2017 Autumn Budget: Other points of interest
Other proposed changes in the 2017 Autumn Budget which will be of interest to contractors, freelancers and small business owners are as follows:
A consultation will be made by the Government to consider extending relief for work related training paid for by employees and the self-employed. You can see the current rules on claiming training expenses for the self-employed here.
The government seem determined to make the concept of having a company car less and less attractive and are introducing the following measures as part of this policy:
- The diesel supplement for company cars (which is used to calculate car benefit) will rise from 3% to 4% unless a car meets RDE2 standards
- The fuel benefit multiplier rises to £22,600 - making the perk of paying private fuel even less appealing
- Van owners don’t escape unscathed either as the benefit charge for private use increases to £3,230 and for private fuel to £610. You can read about the tax rules for company vans in our earlier blog here
- One minor concession is that from April 2018 there will no longer be a benefit-in-kind charge for electricity provided by an employer in workplace charging points for electric or hybrid cars owned by employees. Unfortunately it is unlikely this relief will extend to scenarios where the workplace (or one of them) is at the owner’s home, where there is a charging point.
The government will publish a call for evidence to establish how rent-a-room relief is used and ensure it is better targeted at longer-term lettings.
There will be no changes to the VAT threshold for two years (currently this is £85,000).
For more useful information, check out our Ebooks here.
And if you'd like to know how we can help you with all of this, or with anything else, feel free to give us a call on 01202 048696 or email us at [email protected].