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This was contained in paragraph 5.91 of his statement. This has been translated by some advisors into IR591. Naming these proposals as IR591 gives the impression that we are already dealing with some new piece of legislation.
We must firstly realise that all this is speculation and conjecture and has no substance only hearsay. That said there are some reasonable assumptions.
It is reasonable to assume that as the Revenue are concerned with IR35 and S660A they will attack the payment of dividends and introduce a charge to NI or a different rate of tax probably for closed or small companies.
This may mean that some companies already caught by IR35 and taking a full salary from their company would be better off taking a dividend under a new regime if IR35 was abolished, this is assuming that any new charge on dividends would be less than the current charge to tax and Class 1 National Insurance on salary. The Revenue may therefore retain the IR35 provisions whilst introducing a new dividend tax or contribution on non-IR35 companies who take dividends.
What will be the wording of the new legislation? This is where the speculation really kicks in. My crystal ball clouds over at this stage. The Chancellor could, as has been suggested, concentrate on close companies but he may also bring in an income or turnover limit. In any event composite companies would seem the obvious choice to avoid the proposals and as it is so obvious the Chancellor may bring in some anti avoidance provisions to prevent this.
Brand new legislation invariably brings with it Tax Planning opportunities which we at Qdos will be keen to identify come Budget day.
The current pre Budget advice for freelancers must be:
a) If you were considering a dividend it may advisable to pay it before budget day, but you should check with your accountant first.
b) If you are a contractor caught by IR35 you could be better off after the Budget, if IR35 is withdrawn or modified and also depending on the new charges are on dividends being less than the Class 1 National Insurance they are currently paying.
c) There is no tax planning anyone can advise before we see exactly how the new legislation is worded. Don't panic and keep in touch with Qdos and Shout99 via the websites and we will let you know how the legislation will affect you as a contractor as soon as it has been announced. There will be a special budget reports from Shout99 and Qdos on Budget Day and a more indepth analysis the following day, which will outline all the issues and give advice concerning the way forward for all Freelancers and Contractors.
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Carl Whittaker
Qdos Consulting
Qdos Consulting - for freelancers
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