Most contractors were relieved after George Osborne delivered the 2015 Autumn Statement, as leaked proposals to hit Personal Service Companies (PSCs) were not confirmed, or even mentioned.

However the statement did confirm that tax relief on travel and subsistence expenses is going to be restricted from April 2016, for both PSC and umbrella contractors. This announcement was anticipated and is the one that will affect contractors the most from those made in the statement.

Further change is also expected on the employment intermediaries, as George Osborne stated that he will be looking into ‘disguised remuneration’. Autumn Statement chapter 3.87 reinforced this, stating that the government intends to “take action against those who have used or continue to use disguised remuneration schemes and who have not yet paid their fair share of tax.”

The finer details of the leaked proposal with the potential to reform IR35 and the rules on PSCs were obtained by ContractorUK in the week before the Autumn Statement. They included changes that would mean PSC contractors no longer being able to work for a single client for an uncapped period, and if they did work for more than a month or two, they would then have to pass an online test to avoid having to move onto the client’s payroll.

Despite this plan to payroll some PSCs not being mentioned in the Autumn Statement, contractors have been warned that it may still come into action. The feeling in the contractor sector is that the government is just taking a little further time to reflect on the changes they are going to make, and Osborne’s U-turn on tax credits gives even more reason to believe that he may not scrap the PSC plans.

The Treasury chose its words carefully following the AS, telling ContractorUK: “The government continues to be interested in the IR35 area, but doesn’t have any announcement to make on it at this time.”

The draft clauses in the Finance Bill 2016 last week also contained largely expected measures, again with no mention of any plan to payroll some PSCs, which some had predicted there would be. It also confirmed once more the legislation which will prohibit tax relief on Travel and Subsistence expenses for contractors under ‘Supervision, Direction or Control.’

Due to net the exchequer a projected £505million between 2015 and 2020, the T&S legislation will affect 430,000 people a year, who are employed via umbrellas or agencies.

For further information on what the Autumn Statement and Finance Bill mean for contractors and for ongoing updates visit ContractorUK.

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