Contractors Day of Destiny Today as They Await Finance Bill 2016

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Contractors Day of Destiny

This is a major UK contractors day of destiny today.

Today the Chancellor will announce the details of the Finance Bill 2016 and How It Will Affect Contractors.

It could be one of the most significant days for contractors for many years.

It could also end up as a damp squib. Contractors hope it will be the latter.

Potential New Attack on UK Contractors

By the end of today:-

1. Both umbrella company contractors and personal service company contractors could no longer be able to offset travel and subsistence expenses agans tax
2. Any contractor caught by IR35 will have to go on a company’s payroll after being there for just a month
3. PAYE umbrella companies could be coming to the end as the Chancellor seeks to cut out intermediaries altogether
4. A new compulsory online IR35 tax, enforceable by law, could be announced

Changing the UK Contractor World for Good

As you can see, if all of those were implemented, it would change the UK contractor world radically.

So, what is likely to happen?

1. The removal of travel and subsistence allowances for umbrella company contractors ia a virtual certainty as the Chancellor has already announced that he was going to do it, both in July, and in his recent Autumn Statement. It would take a hell of a lot of good lobbying for that to change over the last couple of weeks. I’d say that this is a 98% certainty – 1/50 in betting terms.
2. The removal of travel and subsistence allowance against tax for personal service companies. Although he announced that he was going to do this in July, by the time the Autumns Statement came along it was missing. It said that only those caught by IR35 would be included. Unless the Chancellor has changed his mind again over the last couple of weeks, perhaps after lobbying from umbrella company owners, this is unlikely to be announced today. It would be a complete shock if it was. I give it only a 5% chance or 20/1 odds.
3. Umbrella Company Contractors Caught by IR35 having to go on a company’s payroll after being at a client site for just a month. This was floated in a couple of newspapers but wasn’t announced in the Autumn Statement. Contractors may have got away with it – or there may be an announcement in today’s Finance Bill. It may be too soon after the Autumn Statement for this to be included but it could be a declaration of intent from the Chancellor. Otherwise, why would he have floated the idea at all? I give this a 20% chance of being announced today, or a 4/1 shot. However, we may hear more of this in the future perhaps at next year’s budget.
4. Personal Service company Contractors having to go on a client company’s payroll. When this was first floated, in the newspapers, it was said that the Chancellor wanted rid of all intermediaries and this incuded both umbrella companies and personal service companies. However, future leaks backtracked on this and said it was just for those caught by IR35, i.e. umbrella company contractors. There was nothing at all about it in the Autumn statement. One would say that there was only a small chance of his being announced today for PSC contractors – but there may be more in the future. I would give it a 10% chance of it being announced today – that’s around 10/1.
5. The Chancellor to Announce Measures Leading to the demise of PAYE Umbrella Companies today. Umbrella Companies will take a major hit with the abolition of the right, from next April, for their contractors to be able to offset travel and subsistence agaonst tax. Some of their contractors could leave them. However, it won’t put them out of business. The Chancellor forcing contractors caught by IR35 to go onto a client company’s payroll, though, would be an existential threat to them. However, the Chancellor, despite Treasury leaks, didn’t announce this in the Autumn Statement. There’s no smoke without fire, though. It may be one for the future rather than today. I’d give this one a 20% chance of being announced today – or 4/1 in betting odds.
6. The announcement of a new online IR35 Test. This is harder to call. Why would the Trasury have floated this idea in the press if they were not going to do it? However, the Chancellor didn’t announce it in his Autumn Statement. It rings true, though, and may be something that he intends to do in the future. He could still announce his intention to do it today. That would be easy to do so it makes it harder to call. I would say that there was a 25% chance, or 3/1 in betting terms, of him announcing this in the Finance Bill today.

Finance Bill 2015 and UK Contractors

So, what does the Finance Bill hold today for UK Contractors?

As I said above, it could totally change contracting in the UK, or it could be a damp squib.

Contractors, umbrella company owners and accountants will be hoping it is the latter.

There are too many of these worrying days now, though, in the contractor calendar. It’s only a couple or weeks since the last one. The next one will be at the Budget in March.

Contractors thought they had got off lightly in the Autumn Statement – but have they?

Look in here for more news and analysis of the 2016 Finance Bill and how it affects UK contractors later today.