The Budget - 5 Key Points from a Construction Point of View
From a tax perspective Construction firms have long had a poor history of compliance on employment. Many take workers who should be in PAYE and encourage them into self employment , or at least tolerate self employment knowing it to be legally dubious. They also encourage workers to form their own limited companies which subcontract for work.
1. The National Insurance rate for self employed workers is to increase from April 2018 by 1% to 10%. It will increase by a further 1% in April 2019. Expect a further increase after that.
2. The tax free dividends that can be received have been reduced from April 2018 from £5000 to £2000
Both these measures will increase the taxes of people working on Construction projects outside PAYE. It reduces the advantage of self employment and limited companies and will make workers less willing to work outside PAYE .
HMRC have been observing some extraordinary fraud in the fringes of Construction probably driven by organised criminals. Companies are set up which manoeuvre gross CIS status and VAT registration. They provide large gangs of labourers , get paid and then disappear without paying the VAT, the PAYE or CIS deductions on labourers wages.
3. The Budget announces a Consultation on a VAT reverse charge for large payments in Construction so that the payer will not hand over VAT but will account for the VAT themselves to HMRC. The consultation will also cover the conditions which have to be passed to get gross payment status. If implemented the measures would require software changes and would impact on cash flow.
Whilst the words Making Tax Digital sound very dull , the measures were going to start a tsunami for the self employed and small businesses in April 2018 and everyone should have been buying software and getting ready in 2017.
4. The Budget announced that Making Tax Digital will start in April 2019 , not 2018 ,for the smallest traders –who were to be the first to move into a world where receipts and expenses were reported to HMRC every quarter. Now it seems that all business will start MTD together in April 2019. If you didn’t know it was going to happen to you , say a prayer of thanks and start to learn what will be involved.
Construction has many workers living away from home and frequently provided those workers with accommodation organised and paid for directly by the employer. Technically this is a benefit in kind and the value is taxable.
5. A consultation has been announced on employer provided accommodation.
20th March 2017