Nobody likes a double dipper, so it’s no surprise that Chancellor George Osborne has been been publicly called out for his twice-yearly raid on contractors money, time and resources.
Limited company contractors have enough tax administration to deal with during an average year. If Chancellor George Osborne kept his pledge to stop using the autumn statement like a mini-Budget, it would be a welcome relief for contractors and their accountants, who already have to deal with one of the world’s most complex tax codes.
MPs on the influential Treasury Committee have recommended that the “primacy of the Budget” be “re-established”. Their report and formal minutes note that the autumn statement, which was established under the previous Labour administration, has taken on the role of being a second, full, Budget. It continues:
“The implications are that business and the economy needs to react to two periods, not one, of potential uncertainty and change. A return to a position of one Budget in the spring, and an updating statement in the autumn, would be desirable.”
Currently, contractors wait with bated breath each November/December and every March to hear of the latest wheeze dreamed up by the Treasury and HMRC to screw more tax out of the UK’s flexible workforce. If the Treasury Committee’s recommendations are heeded by the Chancellor, it will be positive news indeed for contractors, and one less opportunity for politicians and HMRC to tinker with tax rules.
Let’s not forget that limited company contractors already share a potentially disproportionately high burden of tax administration. As directors, company secretaries and shareholders of a limited company, they are burdened with duties and responsibilities spanning both company and tax law.
Contractors are also employees of their own limited companies. That means understanding the complex rules enshrined in tax legislation relating to employee expenses and payroll. It also means understanding employment legislation as it applies to them.
Then there’s IR35 of course, the fiendishly complex yet notoriously open-to-interpretation rules relating to disguised employment. Uniquely, IR35 combines the worst uncertainties of tax and employment legislation in a single package.
For some contractors, all of the above is about to be made worse following the introduction of HMRC’s Real Time Initiative (RTI) on 6 April 2013. Many contractors and their clients, particularly small and medium sized enterprises (SMEs), will find the extra burden of RTI comes at exactly the wrong time. Doesn’t the flatlining economy represent challenges enough to contractors and clients, as the Telegraph’s Philip Johnston highlights?
Restricting the autumn statement to just that, a statement, won’t remove all the trials and tribulations facing your average limited company contractor each year. But it will help in a small way to make contractors’ tax affairs just a little bit less complex.