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How the 2016 Finance Bill will change the UK contractor landscape

by Sable International | Jan 08, 2016
  • The Finance Bill, expected to be passed in the spring of 2016, includes several significant consequences for all UK contractors.
    Coins in a jar with a tax tab

    Contractors in general

    Here’s a short summary of some of the points from the Treasury’s overview of the bill:
    • The dividend tax changes, proposed earlier this year, have been confirmed. A Dividend Allowance, which exempts the first £5,000 of income, will now be available to all contractors. 
    • Contractors who have been using remuneration schemes to avoid tax will come under pressure. Government has vowed to close any loopholes in existing tax legislation. It has also mooted future legislation dealing with any new schemes employed in an attempt to limit tax liability unduly.
    • The General Anti-Abuse Rule has been confirmed and contractors who try to avoid tax will be penalised 60% of the tax that is overdue.
    • Contractors will be required to submit quarterly tax returns. This is part of HMRC’s plan to modernise tax administration in the UK.

    Contractors caught by IR35 or who are under supervision, direction or control

    The most significant change in the bill is the restriction of travel and subsistence allowances for contractors who fall foul of IR35 or are under supervision direction and control (SDC). While these changes were anticipated, it will come as bad news to contractors in these scenarios.

    It is estimated that around 430,000 contractors will be affected by these restrictions. 
    In the overview of the bill, it is stated that these provisions will: “…bring the treatment of their [those under SDC or caught by IR35] travel and subsistence in-line with that of other temporary workers and contractors, whilst ensuring that those who are not under supervision, direction or control whilst undertaking their work, continue to be able to claim relief as before.”

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