Temp page

Revision of IR35 Rules from April 2023

The rules are reverting to the 2017 position whereby the end client is no longer responsible for correctly establishing status of employment

This is a completely unexpected change, and really this puts us back to end engagers closing their eyes as to employment status, and our clients having much more freedom to trade on borderline contracts which might or might not be employment, at their own risk.

A welcome reversal, albeit it does nothing to resolve the 22 year old problem of “so what is an employee?”

This also appears to apply to the public sector. Tax cost? About £1billion a year.

Health and Social Care Levy

This is completely scrapped as part of the NI changes.

You may recall this was to be ‘another tax’ with its own complex rules, launched cynically by Rishi to avoid breaking election manifesto promises not to increase NI. This is a welcome simplicity. You may recall I rubbished the claim this tax was hypothecated, i.e. ring fenced for social care. Turns out it is being met from general taxation now. Fancy that, as Private Eye might say.

Office for Tax Simplification 

This is to be abolished.

You probably didn’t know it existed, but its remit was to simplify taxes. Whilst its plans were usually ignored by the Treasury, it did at least attempt to try and make things simpler. But I guess it’s one less critical voice, even if it was a very quiet one.

38  ‘investment zones’  have been announced, albeit in the early stages.   Details are slight at this point but seem to be mainly around the taxes larger corporations pay (business rates, SDLT), nothing to help employees.  There are also lots of hints about planning rules being relaxed.

This seems to be a continuation of the “Freeport” idea which Rishi was dabbling with but didn’t get very far. I assumed this was more about sound bite than a serious policy, given it’s been tried many times in both the UK and elsewhere with little genuine impact other than moving jobs from one location to another and throwing some tax revenue away. I am quite concerned about this on several levels. First they keep stating these come with a cut in regulations.  But which ones?  An employer’s ‘red tape’ might be a worker’s hard one rights. Similarly a tiresome planning rule might well be protecting a key wildlife area, or flooding risk, and moreover there is talk of these zones (or at least Rish’s versions) being very significant, reaching up to 35km into the surrounding areas. The second point is a practical one;  nearly all major long running tax problems come down to boundaries between two statuses. Given how modern business operate, often multisite with workers working on and off site, how on earth any of this would be codified, administrated and enforced in law is quite frankly a mystery.  How for example will PAYE work for an employee who works some of their week in such a zone but some outside? How will profits be split between sites for corporates? It seems like a big idea with little thought to practical administration, reminding me very much of the failing Making Tax Digital project which is still alive. Just.

All change on the front bench, with new boy Kwasi Kwarteng getting his first big run out as Chancellor. As far as inhospitable times to be a chancellor go, he has probably one of the hardest starts you can imagine, and I seem to have said that every time we had a new Chancellor all the way back to Darling.  Rampant inflation. Huge public deficit. Economy bloodied from Brexit and the economy probably already in a major recession. At the same time we have the requirements for bottomless funding for energy prices (without taxing those making super profits), public services with major funding issues, he is still needing to fund major infrastructure projects such as HS2 and deal with significant real terms benefits pay-outs on pensions. So am I going to go easy on him? Well no.

What do we know about KK?  He is yet another in a long line of  Eton_Oxbridge_worked in the city for a bit_investment bank_multimillionare Chancellors. One suspects hasn’t spent too much time freezing cold and worrying about where the next meal was coming from. At least this one is clearly smart, with a First from Oxford in Classics and History and he even won University Challenge, so nice to have on a quiz team. But will this translate into someone who understands the economy at the sharp end? First impressions are not good. He is one of the co-authors of “Britannia Unchained” along with intellectual heavy weights such as Dominic Raab, Priti Patel and Liz Truss. Book reviews are at best mixed. The crux of the book is that the UK economy is dragged down by troublesome regulations, and the free market if left alone would maximise the nations wealth, something which even your basic A-Level in Economics manages to comfortably rebut. The oft quoted bit about the British workers being the worst idlers in the world  is a small part of it, and this comes largely from the assumption that the general population are just economic units to be utilised by business owners. This book is important as it explains the rationale that leads to the creation of ‘freeports’ and innovation zones. It also explains why the Arts are taking a pounding, and why real terms benefits cuts are not accidental.

So when is a budget not a budget? When it’s a fiscal event. The main difference is that a budget is backed up by detailed analysis, including the “Red Book” which outlines the forecast fiscal impact of each announcement by the Treasury. The trouble our former chancellor had with this………….is that it often contradicted his speech. KK’s response is quite simple, just junk it i.e. remove any official independent assessment of his policies. In doing so, this of course destroys credibility in the speech, and allows opponents to make up their own figures…….. the cross bench Treasury Select Committee said they would have no problem in having all the data available to publish the Red Book, so this is a 100% political decision.  Which he partly reversed in the end following heavy criticism from all sides, with very limited data on some of his announcements published this morning.

This budget Fiscal Event amounts to cutting taxes largely for the large corporations and higher earners, in a dash for growth, with no tangible argument why these tax cuts will promote growth. Indeed we know that those earning over £150,000 will tend to save their tax cuts or put it into their pension, whilst those at the bottom of the pile will spend every penny. Figures bandied around, as we don’t have official ones, put the costs at £45bn a year, mainly to those at the top of the tree. These are very serious sums of money, in addition to the £150bn of support on the energy bills, whilst the super profits on the energy suppliers remain untaxed. Government borrowing looks like it will push past 100% of GDP, levels not seen since the financial crash and naturally breaks all the normal fiscal rules.  This is very much big tax cuts for the rich and public services left to rot.

I had to laugh at the “factsheet” about CT rates which ‘explains’ the rationale. There are some very small straws being clutched, including that modelling from 2013 suggested an 8% cut of CT rates is associated with a 3-4% rise in investment. Or put a different way – after a nearly 30% cut in tax revenue, investment rose very slightly. Investment of course would only account for a fraction of profits in cash terms. Quite how any of that translates into future tax generation to pay for the basics of the NHS, pension and all the other government commitments is beyond my comprehension. It’s either deeply cynical tax cuts for the Tories’ donors, or so brilliant a policy I don’t understand it.

One has to wonder if this could actually be more about deliberately mismanaging the UK finances to engineer a massive black hole to hand to the next government. The fiscal equivalent of deliberately peeing on the carpets before an eviction. However I do get the impression this is a genuine attempt at growth, by a government fixated with the largely debunked economics of ‘trickle down’ and ignoring the huge elephant in the room – inflation. And the attendant sterling crises which don’t even seem to get a look in. Of course don’t mention the 5% hit to GDP due to Brexit. Not even Labour (who again made a solid response to the Chancellor, that that is was very hard) dared to do that.

Anyway, all this again in November, assuming we still have the same front bench that long.