The Official Budget 2016 thread

[AtW]

So personal allowance up, income tax down and corporation tax down... weren't contractors whinging last year?

Allowance up by a tiny amount NEXT year - not everybody gets it.

High rate threshold is up by tiny amount NEXT year.

Corporation tax will be up by tiny amount in April 2020, followed by Labour landslide in May 2020 and emergency budget June 2020 with corp tax returning to 28%.

This in no way makes up for massively increased tax on dividends that kicks in NEXT MONTH.

Only good new is that CGT is down to 20%, but then again HMRC was not getting much money from it anyway. Strange that Govt wants businesses to SELL rather than have them run for longer with jobs provided and owners collecting dividends for a long time. Should be the other way around - low tax on dividends and high tax on capital gains (unless very long term).

[AtW]

By increasing the 40% tax band to 45k, are the government trying to ease the pain of the dividend tax? for somebody on 45k this year compared to 45k in 2 years is about the same now..... give with one hand and take with the other.

No, they are just trying to buy referendum votes cheaply - the increase in theshold is NEXT year and it's not like they give you tax free money - 20% tax still due, so they are "giving away" a few hundred quid, big deal.

[swamp]

Yes, so it's going to depend on how they design the ESI to be used by the public bodies in determining whether the rules apply.

The people implementing the ESI will be PSC contractors.

[m0n1k3r]

They essentially have a sandpit where they can define and redefine their ESI tool until they have something that achieves the balance they're trying to strike (I don't think they even know what this is yet; the figure of 90% non-compliance doesn't stack-up, even remotely)

One point of concern is that now that they have stated 90%, they have to make it so through the ESI tool.

[m0n1k3r]

At the moment in the public sector you have to have an IR35 contract review (to operate outside).

Doesn't always help. The last time I worked for the PS I asked for a draft contract from the agency and had it reviewed with a 'pass' mark while the client was still deciding. The contract they then put up online for me to sign was instead the standard Crapita contract. When I asked why, they said that Capita now requires it for reasons of that vague, undefined excuse that agencies love to call 'compliance'.

[dundeedude]

Doesn't always help. The last time I worked for the PS I asked for a draft contract from the agency and had it reviewed with a 'pass' mark while the client was still deciding. The contract they then put up online for me to sign was instead the standard Crapita contract. When I asked why, they said that Capita now requires it for reasons of that vague, undefined excuse that agencies love to call 'compliance'.

Too broad a brush.

I've just finished in the public sector and the agency were direct with the body in question - no CLone framework and the contract was actually very much outside IR35. Avoid Crapita at all costs.

[jamesbrown]

One point of concern is that now that they have stated 90%, they have to make it so through the ESI tool.

There's nothing to stop them doing it, mechanically. However, bearing in mind that 90+% are likely to be compliant as things stand, they'll need to dramatically change the criteria away from the traditional IR35 tests, and perhaps even SDC (given that most public sector bodies will have an incentive to retain their best contractors). If they do that, I can't really see what they stand to gain. They think they're going to increase compliance and, therefore, increase tax take, but HMRC are notoriously bad at predicting behavioural responses. In reality, they'll trigger a mass exodus from PS work, resulting in a lot of failed projects and no more tax. I suppose we can say one thing: it'll be interesting to watch (if you don't do PS work).

[Waldorf]

The Official Budget 2016 thread

Only good new is that CGT is down to 20%, but then again HMRC was not getting much money from it anyway. Strange that Govt wants businesses to SELL rather than have them run for longer with jobs provided and owners collecting dividends for a long time. Should be the other way around - low tax on dividends and high tax on capital gains (unless very long term).

This is to attempt to reward entrepreneurs to build businesses and grow the economy.

What do you think happens when a business is sold, if it is worth anything the employees are not all sacked and usually employment grows and it should continue to make profits and so pay dividends. There may be an argument when private equity gets involved as they tend to pile up debt, but generally buying and selling companies, businesses etc encourage growth and the economy.

[Waldorf]

The Official Budget 2016 thread

Allowance up by a tiny amount NEXT year - not everybody gets it.

High rate threshold is up by tiny amount NEXT year.

Corporation tax will be up by tiny amount in April 2020, followed by Labour landslide in May 2020 and emergency budget June 2020 with corp tax returning to 28%.

This is the way things are generally done, so the personal allowance was just £6,035 in 2009/10, it is now £11,000 and heading for £12,500 by 2020.

Personally I would prefer to see the tax and NIC allowances aligned, thus helps the lower paid more than just increasing the tax allowance.

Corporation tax will have fallen from 28% to just 17% by 2020, clearly a support for business.

No chance of a Labour win in 2020 never mind a landslide, if Corbyn remains as leader then I can we'll see them getting under 200 seats in 2020.

Despite Corbyn being Labour leader is good for the Tories in the short term, I would like to see him go, he is doing great damage to the Labour Party, moving it to the extreme left etc and this is no good for democracy nor the Conservative Party.

[seeourbee]

Eh? You seem to be misunderstanding quite a bit of this. There's absolutely no need to define a PSC or distinguish between consultancies or agencies or anything else. A placement will be deemed inside or outside under the new rules, upfront, and it will be propagated contractually up the chain so that your direct client (agent or third party) will be responsible for calculating and making the deemed payment. However, unlike the usual approach, this deemed payment will go to YourCo rather than you. You and YourCo will then receive an equivalent tax relief to reduce the CT to zero, along with any tax on payments to you (as salary or dividends). The net effect is that you can retain the use of a Ltd company, but the effective tax rate will be akin to the IR35 deemed payment, so there will be no retained profit and a high rate of tax. There are some question marks over the details though, such as the operation of the 5% for administrative expenses and pension payments.

All of this is precisely in keeping with the principle outlined in the IR35 Discussion, namely to increase the frequency with which employment taxes are being paid, without increasing the number of employees.

But the current IR deemed payment rules doesn't allow you to set off your deemed payment against your other Income and Dividend tax liabilities does it ?