Contractors, recruiters, accountants, end clients and everyone else in the sector have been waiting with eager interest for the Spring Budget 2020 for a number of reasons. It’s the first Budget of the current Government, it’s the first post-Brexit Budget, it’s the first Budget for new Chancellor Rishi Sunak, and the last Budget before the ushering in of the IR35 private sector reforms on 6th April.
However, current events have taken over and, in the end, it was for an entirely different reason that this Budget was watched so closely, with the nation keen to see how Mr Sunak would respond to the threat posed to the economy by the worldwide Coronavirus pandemic.
Coronavirus and support for the self-employed
Naturally, COVID-19 took up a lot of the Chancellor’s speech, as he pointed out that there will likely be temporary disruption to the economy as people stop spending as much money and up to a fifth of the workforce take time off at once. However, Mr Sunak was also confident that the UK’s economic performance would be able to recover.
Many of the measures he discussed where only applicable to employees or those claiming benefits. He did, however, detail some actions that have been raised that should support self-employed people through the pandemic. These include:
- Support for those who are ineligible for Statutory Sick Pay (SSP). This would take the form of a ‘new style’ Employment and Support Allowance [which] will be payable for people directly affected by COVID-19 or self-isolating according to government advice for from the first day of sickness, rather than the eighth day.
- Self-employed people and businesses that are affected will also receive support with tax affairs. HMRC will waive late payment penalties and interest where businesses experience difficulties contacting HMRC or paying taxes due to COVID-19. There is also a dedicated COVID-19 helpline to assist those in need.
- The government will [also] launch a new, temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, to support businesses to access bank lending and overdrafts.
An update on IR35, taxes and NICs
After so much speculation about whether this budget would bring about any changes or delays to the IR35 reforms, in the end they warranted no mention in the speech and only a short paragraph in the documentation. All this told us was that the reforms are going ahead as planned, unchanged on 6th April 2020: The government believes it is right to address the fundamental unfairness of the non-compliance with the existing rules, and the reform will therefore be legislated in Finance Bill 2020 and implemented on 6 April 2020, as previously announced.
This is going to be disappointing news for many who were perhaps hoping for a delay, but with the recent IR35 review outlining a small number of changes but cementing the intention to continue with the launch date as planned, it is not entirely surprising.
In related news, albeit separate to the IR35 reforms, extra funding is going to be made available to HMRC to tackle tax avoidance schemes and promoters, raising an additional £4.7 billion between now and 2024-25.
Changes are also being made to Entrepreneurs’ Relief. The government will continue to use the tax system to support genuine risk-taking and creativity where it is proven to be effective. In response to evidence that Entrepreneurs’ Relief has primarily benefited a small number of very affluent taxpayers and done little to generate additional entrepreneurial activity, the government will reduce the lifetime limit on gains eligible for relief to £1 million. This will ensure that enterprising small business owners will continue to benefit, leaving over 80% of those using the relief unaffected, while making the tax system fairer and more sustainable.
Meanwhile, the Primary Threshold and Lower Profits Threshold for National Insurance Contributions are being raised to £9,500 from April 2020 for employees and the self-employed respectively. For the typical self-employed person, this will represent a saving of about £78 in 2020/2021.
Public spending
Rishi Sunak has used the Spring Budget 2020 to commit to a huge spending programme, effectively ending the politics of austerity that have been in place for more than a decade. In total, around £640 billion of gross capital investment will be provided for roads, railways, communications, schools, hospitals and power networks. The Treasury has also made a commitment to spending £1 billion on a Building Safety Fund to remove unsafe cladding in the wake of the Grenfell disaster.
During his speech, Mr Sunak said If the country needs it, we build it. This sort of spending pledge should create many job opportunities especially for contractors in a variety of sectors working on a project basis. It’s music to many contractor’s ears after years of funding for public projects being in short supply.
Support for the self-employed
The Spring Budget 2020 also had several mentions of ways the Government plans to support self-employed people going forward. These include:
- Extending funding for the Start-Up Loans programme to the end of 2021/22, supporting up to 10,000 further entrepreneurs across the UK to start a business through access to finance.
- HMRC’s new interactive guidance launching in the summer this year which is designed to make navigating the tax system easier for self-employed people.
- Additionally, the government will consider how to provide appropriate support to self-employed parents so that they can continue to run their businesses, as part of its wider review of Parental Pay and Leave.
While many self-employed people would like to see more recognition of their vital role in the economy from the Treasury, these steps at least show they are on the Government’s radar. Although some may say that these gestures mean little to contractors when tempered with the pushing through of the deeply unpopular IR35 reforms.
All in all, it was perhaps not the budget that many contractors had been hoping for although it was always highly unlikely that Mr Sunak would delay or scrap the IR35 reforms at this point. The need for announcements around tackling the crisis posed by COVID-19 meant that issues such as IR35 were pushed firmly off the table. Despite current affairs well and truly taking over this Budget, there were still several announcements for contractors to examine with interest.
