Phillip Hammond, Chancellor of the Exchequer, is renowned for punctuating his statements with (usually bad) jokes, but many contractors have picked up on one that wasn’t meant in jest. Mr Hammond maintained in the Spring Statement 2019 that he belongs to ‘the party of business’, yet many small businesses – and certainly the self-employed - may feel differently.
We’ve cherry-picked the most relevant points for you below, but you can read the full Written Ministerial Statement here.
Quiet Spring Statement
This year marked a quiet Spring Statement. With Brexit negotiations still raging and only 12 working days to go until the deadline, it’s understandable that the Statement wasn’t upgraded to the full fiscal event that Mr Hammond suggested it could be.
He focussed on the bigger picture, announcing a spending review on Public Spending, some much-needed investment in Midlands-and-Northern infrastructure, plans to revisit the National Living Wage, a reiteration that tech giants can expect to pay their fair share of tax and investment in affordable housing. He also touched on the UK’s environmental improvement efforts, promising further details of plans to lessen the country’s carbon output over the coming months.
It’s a little perplexing that neither IR35 or the loan charge warranted a mention during Mr Hammond’s speech, given the growing media coverage of both peices of legislation and the Loan Charge Action Group’s All-Party Parliamentary Group having been established.
However, the Written Ministerial Statement shed a little more light on what could be coming in Autumn Budget 2019.
Tax avoidance, evasion and non-compliance
The section of the Statement starts as such:
‘Since 2010, the government has secured and protected over £200 billion of tax that would otherwise have gone unpaid, introduced over 100 measures to reduce avoidance, evasion and other forms of noncompliance, and continued to support taxpayers to get their tax right.’
The government also published a policy paper called ‘Tackling tax avoidance, evasion and other forms of non-compliance’ while the Spring Statement 2019 was underway, which details HMRC’s achievements since 2014 – read here.
There is no mention of IR35 or the loan charge throughout the entire section, and no mention of the numerous enquiries into the handling and implementation of IR35 and the loan charge. In fact, the only other definitive statement is the name of a future report, which is to be titled‘Preventing abuse of the R&D tax relief for small- or medium-sized enterprises (SMEs)’; this will be focussed on how to minimise the effects of tax-avoidance measures on genuine small businesses.
This could be a good sign for owners of small businesses worried about changing tax rates. However, looking at HMRC’s record with both IR35 and the loan charge legislation, it would be prudent to hope for the best but prepare for the worst.
Read more about the Small Companies Rate here.
Making Tax Digital
Mandatory digital record keeping for VAT for businesses over the VAT threshold (with turnover over £85,000) will come into force from 1st April. It appears that no further action is required, aside from preparation for MTD for VAT, until 2021.
Despite many criticisms of HMRC’s rollout plan and strong advise from MPs to push the launch date back to give small business owners more time to prepare, the government are sticking to their schedule.
The Chancellor did confirm, however, ‘a light touch approach to penalties in the first year of implementation’ – defined as ‘where business are doing their best to comply, no filing or record-keeping penalties will be issued.’ This is a worryingly subjective statement, and it’s hard to imagine how businesses will prove convincingly that they’re ‘doing their best’ to avoid the fine.
If you haven’t already, make sure you have compatible software ready for April 1st. You can also read our guide on how to fully prepare your business for MTD here.
Offshore oil and gas decommissioning industry
There’s been a call for evidence seeking to identify what more should be done to strengthen Scotland and the rest of the UK’s position as a global hub for safe, environmentally-friendly decommissioning that meets the Oil and Gas Authority’s ambition cost reduction targets.
The increased focus on getting ‘greener’ with our energy supply will see energy sector contractors having to adapt their skills accordingly to the shifting work. However, the Written Statement’s spotlight on decommissioning suggests a potential demand for energy sector contractors, both on and offshore, over the next five years.
Spring Statement 2019 Takeaways
There are some huge issues clouding the government’s vision at the moment, but sooner or later those problems will begin to disperse. You can be sure that their attention will turn back to scraping back the extra £2bn tax gap when that happens.
Kate Ison, Tax Partner at Bryan Cave Leighton Paisner, states: ‘HMRC will continue to take an aggressive approach towards challenging tax avoidance and non-compliance as a way of reducing the tax gap. HMRC has confirmed it is willing to work closely in collaboration with businesses to promote tax compliance, but where it suspects non-compliance it will move quickly to investigate. Where disputes with HRMC arise, the climate for achieving settlements with HMRC is likely to remain difficult.’