Today the Chancellor of the Exchequer, Mr George Osborne MP, announced the 2015 Budget.
As widely expected the Chancellor did not announce any plans to amend or repeal IR35. However, a series of anti-avoidance measures were announced which are of relevance to limited company contractors, especially those who claim tax relief on travel and subsistence.
Travel and subsistence allowance
The Chancellor announced that the conclusion of the review initiated in the Autumn Statement 2014 into the practice of allowing temporary workers under an umbrella contract to claim 'home to work' travelling and subsistence allowance. This allowance is not available to employees. Although the precise details are not available and will be published in April 2015, it is clear that umbrella workers and limited company contractors who are under the supervision, direction and control of the end-user will henceforth no longer be able to claim travel and subsistence allowance for temporary work places. This is likely to be seen as a politically motivated measure, undermine flexibility and create uncertainty in the labour market.
This does not affect genuinely self-employed contractors and further analysis of the new rules will be published here. The risk involved for limited company contractors is uncertainty as to whether an engagement genuinely constitutes self-employment and whether HM Revenue & Customs can reclaim with interest incorrectly claimed expense and subsistence allowances. It is therefore imperative to resolve questions regarding employment status before the start of an engagement to mitigate such risks. It is likely that a limited company contractor who is outside IR35 will not be affected by the new rules.
Capital Gains Tax
The government will impose measures to ensure that 'entrepreneurs' relief on the disposal of personal assets used in a business is only available when someone is making a meaningful withdrawal from that business.' Entrepreneurs' Relief will now be restricted to disposals of at least 5% of a company's shares. This is relevance to limited company contractors who plan to sell their businesses entirely or shares in their companies.
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