Budget 2013’s announcements for freelancers/the self-employed
As announced in January 2013, £30m additional funding has been given to expand the Start-Up Loans scheme in England and increase the age limit to 30, up from 24.
Budget 2013 states that the government will consult on options to simplify the administrative process for the self-employed by using Self Assessment to collect Class 2 NICs alongside income tax and Class 4 NICs.
As previously committed to, the state will introduce a new cash basis for small, unincorporated businesses – self-employed freelancers - to calculate their income tax from next month. Businesses with annual receipts up to £79,000 will be eligible and will be able to continue to use the cash basis until receipts reach £158,000. The same unincorporated traders will also get a simpler system for expenses from April 2013.
Still with the self-employed in mind, the government said it would ask the Office of Tax Simplification to carry out a review of ways to simplify the taxation of partnerships. This will include an initial scoping exercise to identify which areas are most complex for taxpayers.
As previously announced, but also to help would-be freelancers, the government says it will introduce a disincorporation relief – so limited company owners can move to self-employment without suffering a tax disadvantage , for five years from next month. The relief will be available to businesses with total qualifying assets not exceeding £100,000
IR35 and Office Holders
Budget 2013 reiterates the government’s position on IR35 – which will be extended to ‘office holders’ – but does not feature the new IR35 guidance which the taxman has promised to publish for such freelance contractors “shortly.”
“The silence on IR35 is deafening,” reflected IR35 adviser Kate Cottrell. “But it illustrates that the government is currently happy with HMRC’s new approach to the legislation, and is happy too to make it clear that it has always applied to office holders.”
She added that while Budget 2013 confirms that the amendment to the IR35 provisions for ‘office holders’ is incoming, “until we have the final legislation passed the precise wording could still change andI doubt that the guidance will appear until the wording is agreed.”
The freelancers’ trade group, PCG, believes the government missed an opportunity by not using yesterday’s Budget to clarify who ‘office holders’ includes and in what circumstances officialdom wants IR35 to apply to them.
The group said: “Although we expect further guidance from HMRC to be released at the same time as the Finance Bill, HMRC should have used the Budget as an opportunity to reassure the freelance community that the scope of the planned changes to IR35 is limited.”
Reflecting on IR35’s proposed extension to ‘office holders’, accountancy firm Nixon Williams offered some reassurance: “This is unlikely to affect most contractors, as it applies to freelancers in senior positions, such as directors.”
Small and medium-sized enterprises
Perhaps the loudest applause from business support groups was reserved for Mr Osborne’s unveiling of a new employment allowance, which will reduce the first £2,000 in employer NI costs for all employers from April 2014. The chancellor says the policy is a “tax off jobs.”
Keeping an eye on SMEs’ growth prospects, he also committed £30m to help companies overcome barriers to expansion by obtaining the advice they need to grow, with specific help promised on finance, employment law and other areas.
In an attempt to shore up SMEs’ financing options, the Business Bank will deploy £1bn of new capital, improve existing schemes and develop a lasting new institution to support SME growth via lending by the end of 2014.
Additional new measures for enterprise include a 10% increase in the above the line R&D tax credit; an extension of CGT relief for the SEED investment scheme; CGT relief on the sale of a controlling interest in a business into an employee ownership structure and tax relief for private investment in social enterprise. The previously announced Patent Box, which offers users a corporation tax rate of 10%, is also incoming from next month.
Elsewhere in Budget 2013, the government says it will abolish Stamp Tax on Shares for companies listed on the Alternative Investment Market and the ISDX Growth Market, from April 2014.
Creative industry and other sector-specific announcements
The government will launch a public consultation on options to provide further support for the Visual Effects industry through the tax system.
As announced at Budget 2012, the government will introduce corporation tax reliefs for the animation, high-end television and video games industries. The animation and high-end television tax reliefs are expected to be approved shortly, to start on 1 April 2013. The video games tax relief will be introduced following state approval, but is already said to be stimulating jobs and growth.
The sale of 4G mobile spectrum will enable the delivery of competitive high speed mobile broadband from this summer onwards.
The Technology Strategy Board will design and launch a new competition of up to £15 million, inviting consortia bids to support digital content production through partnerships with industry, including specialist SMEs, educational research facilities and training providers.
Funding for the Skills Investment Fund will be increased to £8m each year over the next two years, with government match-funding voluntary industry contributions to support skills development in the UK digital content sectors .
A new ‘above the line’ credit for large company R&D investment from next month will be introduced.
The establishment of an Aerospace Technology Institute to provide a total of £2.1bn of research and development support over seven years, with the government and industry contributing equal shares.
Improvements to the UK’s infrastructure with a commitment to increase capital spending by £3bn a year from 2015-16 were also pledged in Budget 2013. To ensure investors are enticed by evidence-based assessments, the government will consider options for making more use of “independent expertise” in shaping its infrastructure strategy.
· Main rate of corporation tax to drop from 28% to 23% in April 2013, then down to 21% in 2014, before falling again to 20% in 2015. Small companies, whose profits are under £300,000 a year, will receive no tax cut as they pay tax at 20% already.
· Alignment of the small companies’ profit rate with the headline rate of corporation tax, so a single rate of tax for all businesses emerges – 20%, the first move of its kind since 1973.
· Tax-free childcare - in the shape of 20% off the first £6,000 of childcare costs per child for working-families.
· As announced in December 2011, the government will introduce a statutory definition of tax residence and abolish ordinary residence for most tax purposes from April 6 2013.
pay increases in 2015-16 will be limited to an average of up to one per cent.