Budget Day 11 March


Chancellor Sajid Javid has announced that he will deliver the 2020 Budget on Wednesday 11 March 2020.

The 2020 Budget will be the first to be delivered after the UK’s departure from the EU on 31 January 2020.

It is also Mr Javid’s first Budget as Chancellor, following the cancellation of last November’s planned Budget due to the General Election.

Mr Javid said:

‘People across the country have told us that they want change. We’ve listened and will now deliver.

With this Budget we will unleash Britain’s potential – uniting our great country, opening a new chapter for our economy and ushering in a decade of renewal.’

In the Budget announcement, the government said that it will prioritise the environment, and build on recent announcements to boost spending on public services and tackle the cost of living.

We will update you on Budget announcements.

Internet link: GOV.UK news

Brexit – transition period


The leaders of the UK and European Union signed the Withdrawal Agreement, and the UK left the EU on 31 January 2020. However the UK is now in the transition or implementation period during which time it is ‘business as usual’ as the UK is covered by EU rules until the end of the year. By 2021 the UK aims to have agreed a deal on future arrangements with the EU and the rest of the world.

HMRC has contacted businesses in the UK who may import and export between the UK and the EU to explain what they can do to prepare for changes to customs arrangements after the UK has left the EU.

No change during the implementation period

Between 1 February and 31 December 2020, there will be an implementation period. HMRC has confirmed that there will be no changes to the terms of trade with the EU or the rest of the world during this time.
From 1 January 2021, the way businesses trade with the EU will change and HMRC is reminding businesses that they should prepare for life outside the EU, including ensuring they are ready for customs arrangements.

HMRC is advising businesses to:

  • make sure they have a UK Economic Operator Registration and Identification (EORI) number
  • prepare to make customs declarations.

HMRC has posted letters to 220,000 VAT registered businesses advising them on the current position.

We will advise you on the progress of negotiations and what these will mean for your business.

Internet link: GOV.UK HMRC letters

Working off-payroll


From 6 April 2020, a change to the off-payroll (IR35) rules is expected. Draft legislation has already been published and further HMRC guidance is expected.

The new rules will affect you if you work via your own personal service company (PSC), and off-payroll workers should be aware that their clients are likely to investigate the profile of the contractor workforce more closely than before, as part of a review of compliance, strategy and spend. But the changes could be felt more widely: anyone supplying personal services via an ‘intermediary’ could be within scope of the IR35 rules. An intermediary can be an individual, a partnership, an unincorporated association or a company.

Contracts caught by the rules

The change could impact you if you supply personal services to large and medium organisations in the private and voluntary sector. If the client is a ‘small’ business, the rules are unchanged. A ‘small’ company meets two of these criteria: its annual turnover is not more than £10.2 million: it has not more than £5.1 million on its balance sheet: it has 50 or fewer employees. If you contract with an unincorporated organisation, the new rules only apply if its annual turnover is more than £10.2 million.

Who decides?

Under the new rules, responsibility for making the decision as to whether IR35 rules apply passes to the business you contract for. The key question is whether, if your services were provided directly to that business, you would then be regarded as an employee. You may be used to this if you undertake contracts in the public sector, where similar provisions already exist. If you or your client use CEST, HMRC’s online check employment status for tax tool, HMRC undertakes to stand by the results if information provided is accurate, and given in good faith. At present, however, HMRC considers CEST is unable to determine status in 15% of cases, and many commentators consider the failure rate much higher. HMRC is working to improve CEST with the forthcoming changes in mind.

In future, your client will have to provide you with the reasons for its status decision in a ‘Status Determination Statement’ (SDS). If you disagree, you can challenge the status determination with the business, and it should respond within 45 days, either withdrawing or upholding the decision, again supplying reasons.

Implications

Significant tax implications arise. If IR35 applies, the business or agency paying you will calculate a ‘deemed payment’ based on the fees charged by your PSC. Broadly, this means you are taxed like an employee, receiving payment after deduction of PAYE and employee National Insurance Contributions (NICs). If you operate via a PSC, the PSC will receive the net amount, which you can then receive without further payment of PAYE or NICs. The potential tax advantages of working under such a contract, especially for PSCs, are much reduced.

Review your position

This is a good time to take stock of your options. Are clients likely to query your employment status? Should you consider restructured work arrangements, or renegotiating fees? If working via a PSC, is it still the best business model? With clients checking that contracts comply with the new rules, employment status for contractors is likely to come under increasing scrutiny. Please contact us for specific advice on your options and the tax consequences.

Welsh government publishes Draft Budget


The Welsh government has published its Draft Budget, setting out revenue raising and capital spending plans for 2020/21.

The Draft Budget confirms no changes are proposed to Welsh income tax rates, or Land Transaction Tax rates and bands. The Draft Welsh spending plans for the longer term will depend on the next UK Budget and comprehensive spending review scheduled for 2020.

Internet link: GOV.WALES Budget