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Chancellor Dashes Hopes of IR35 Delay in Spring Budget

Chancellor Dashes Hopes of IR35 Delay in Spring Budget

Chancellor Rishi Sunak yesterday confirmed plans set out by the Treasury in its recent Off-Payroll review to go ahead with IR35 reform from April 6th. Although no direct reference was made in Sunak’s speech, the Chancellor spoke of “aggressive” steps to tackle perceived tax evasion. However the budget document (2.178) reads: “The government has recently concluded a review of the off-payroll reform, and is making a number of changes to support its smooth and successful implementation….the reform will therefore be legislated in Finance Bill 2020 and implemented on 6 April 2020, as previously announced.”

Although many in the contracting industry feared the Treasury’s review was a forgone conclusion because of its limited scope, the House of Lords Finance Bill Sub-Committee is yet to conclude its inquiry into the proposals. Over recent weeks, the committee hearings have discovered compelling evidence of extensive damage caused by the legislation, as well as rife non-compliance amongst hiring firms. The budget finalises the government’s intention to introduce the changes, despite unanimous expert opinion that the rules need a radical rethink, or replacing with something else entirely. This means that contractors need to ready themselves for the reforms without delay.

Elsewhere the budget was dominated by the government’s planned response to the coronavirus outbreak. In the UK’s first budget since leaving the EU, Sunak warned of challenging times ahead, while promising that the government were ready to rally. Alongside a £30bn package of emergency measures to shore up the economy against the impact of Covid-19, the government also announced major spending and investment plans.

Sunak said the aim of the budget was to deliver security for today while also investing for future prosperity. While he acknowledged there would be temporary disruption to the economy, the measures taken in the budget are aimed at protecting the economy against a drop in productivity and spending, while also protecting vital public services such as the NHS.

With this in mind, the Chancellor announced a dramatic loosening of the public purse. A raft of loans and tax cuts amounted to the biggest fiscal boost in 30 years; next year this will result in the largest increase in departmental spending for 15 years. Sunak maintained that the government were delivering on their promises and more, with the assurance that this was a government that “gets things done” – a phrase used repeatedly throughout his speech.

Coronavirus: To protect the economy from Covid-19, Sunak said £2bn would be allocated to cover up to 2m firms employing fewer than 250 employees that lose out because staff are off sick. A series of cheap loans would also be on offer while smaller firms in some of the hardest-hit industries, including retailers and hospitality, would not have to pay business rates. A further £1bn would cover compensation for people on benefits who become sick. For those who do not qualify for sick pay, such as the self-employed, it will be easier to get benefits which will be available from day one. The minimum income level will be also be temporarily removed from universal credit.

NHS: The Chancellor refuted claims that the NHS couldn’t cope with the extra costs and resources needed to combat the next potential virus. Sunak promised to boost a planned £34bn increase in NHS spending to more than £40bn. He was adamant that the NHS would receive “whatever it takes” to contain the virus.

Economy: Following talks with the Bank of England, Sunak had already confirmed that there will be an emergency cut in the base interest rate from 0.75% to 0.25%.The Chancellor claimed the OBR had calculated that this extra spending on roads, rail, hospitals and digital infrastructure would increase Britain’s long-term productivity by 2.5% and add 0.5% a year to GDP growth.

Other notable points:

  • The National Insurance Contributions tax threshold is to rise from £8,632 to £9,500 – which equates to savings of up to £100 a year for 31 million employees
  • Corporation Tax will remain at the current 19% for now
  • Fuel duty to be frozen for the 10th consecutive year
  • The government will go ahead with a “digital sales tax”, resulting in a 2% levy on online marketplaces from 1st April
  • Entrepreneurs’ Relief will be retained, however the lifetime allowance will be reduced from £10m to £1m
  • The Chancellor pledged to invest in “technologies of the future” including £5bn to get high-speed broadband into the most remote areas

Sunak also paid tribute to his predecessor, Sajid Javid, and stressed the need for all parties to come together in the coming weeks. Sunak also paid homage to the UK’s long history of innovation and creativity, saying that he wanted to “unleash” the potential of the British people with a “dynamic low tax economy” that invests in ideas. Sunak stated that there is a “live global debate about what the low-interest environment means for fiscal policy”. Subsequently, he will take time to review the fiscal framework in time for the autumn budget.

If you’ve been affected by any issues in the budget, Contracting Scout has a range of options to help you keep your contracting career on track. To talk to a member of our team, call: 0203 603 1878