Spring Statement 2018: What Should Contractors Expect?

Spring Statement 2018

With the Spring Statement less than a week away (13th March, to be precise) it’s time to take a look at what exactly it might hold for contractors. Regular readers of this blog (and the self-employed in general) will be aware that previous Budgets and Statements, for a few years now, have been unduly weighted towards penalising contractors and freelancers. Will this year be any different?

IR35 in the Private Sector

That, of course, is a question that remains near impossible to answer at this point in time. But we can speculate. In last November’s Autumn Budget the Chancellor moved to put a consultation in place for the extension of the previous April’s public sector IR35 reforms into the private sector.

With the contracting community split on whether to use that consultation period as an opportunity to torpedo such reforms before they get started or to work with HMRC to ensure as smooth a rollout as possible, avoiding the issue of multiple parallel approaches to the same problem, any final decision remains very much up in the air at the time of writing.

At this point, it seems wise for us to sound a note of caution. Public sector IR35 reform has been much-maligned since it came to fruition, and rightly so. Chancellor Hammond would do well, therefore, to heed the advice of a number of key stakeholders who have warned of widespread chaos as well as damage to an already fragile economy.

With the rigours of Brexit looming large on the horizon, the Conservatives are sure to have their hands full. Do they really want to unduly punish the thriving self-employed community with punitive reforms that they are unlikely to be able to meaningfully troubleshoot should anything go wrong?

That being said, we shouldn’t be surprised if the government decides to publish its consultation on private sector IR35 reform on or around 13th March, especially given that it was expected at some point early in 2018. Unfortunately, given that HMRC has recently hailed increased tax receipts as proof of the success of public sector IR35 reform, it seems as though any changes in that regard are likely to be pushed through into the private sector at speed.

Contractors in the public sector affected by the April 2017 reform saw significant reductions in their take-home pay and, unfortunately, private sector contractors should brace themselves for something similar should the worst happen. The only remaining question seems to be ‘When will it be implemented?’ Based on our current timescale and previous events, April 2019 seems most likely.

A Quiet Tuesday?

What else might be on the cards? It’s worth remembering that the Spring Statement may well be a complete non-event (not a bad scenario by any means.) The government has been at pains to state that the Autumn Budget is the only major fiscal event of the year, and that we should not consider the Spring Statement to be some kind of surrogate mini-Budget.

Next Tuesday’s announcement, according to a Treasury spokesman, will make that break from tradition quite clear. The Statement will last no more than 20 minutes, will have no red box or official document, and will contain no spending increases or tax changes. As the Chancellor noted back in 2016: “No other major economy makes hundreds of tax changes twice a year, and neither should we.”

As ever, however, that rejoinder came with its own caveat, the Treasury noting that “the government will retain the option to make changes to fiscal policy at the Spring Statement if the economic circumstances require it.”

What we will see is a response to the OBR’s (Office for Budget Responsibility) economic forecasts, with Mr. Hammond providing updated figures. Whilst that may not seem particularly relevant to the contracting community at first glance, the broader health of our economy will inevitably have an impact on future government tax policy which, in turn, will trickle down to the treatment of the self-employed.

Will we see further reaction to the Taylor Review? The government only recently responded to its myriad recommendations, but it was some response, unveiling numerous consultations and either fully or partially adopting all but one of Taylor’s 53 proposals.

The Department for Business, Energy and Industrial Strategy embraced the idea of regulation for umbrella companies and other intermediaries, as well as the idea of a compulsory fact sheet for umbrella contractors designed in part to increase transparency in an often-confusing market. Both of these should be considered positive steps, given that they are likely to empower contractors and allow them to make informed decisions before they decide which route to take.

Ultimately, the best-case scenario would be a Spring Statement that didn’t mention contractors or self-employment reform at all. Given their past status as whipping boys for the point-scoring mandarins responsible for making policy, a quiet day for contractors come 13th March would qualify as a success. The chances are good right now but, as ever, contractors, freelancers, and the self-employed should steel themselves for the unexpected.

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