The new Finance Bill may well become one of the strongest reasons why independent contracting professionals may choose to switch from working through their own personal service companies (PSCs) to compliant, well-run Umbrella Companies. At 674 pages, it is one of the longest pieces of financial legislation in history, and while it will predominantly apply to larger organisations, it will also complicate the tax system for all businesses.
The new Bill, which has been dubbed by the Chartered Institute of Taxation (CIOT) as resembling a Dostoevsky novel in length, will contain measures devised before Chancellor Philip Hammond took office, especially the 2016 Budget, which announced no fewer than 50 new tax reforms. These were compiled under the watch of Mr Hammond’s predecessor, George Osborne, while the current Chancellor’s 2017 Budget was one of the slimmest in recent history, containing just 14 new tax reforms.
CIOT said that the new Bill contains no real surprises, and as expected, it will bring into force measures that were dropped from the pre-election Finance Bill.
Speaking about the new Bill, CIOT’s Tax Policy Director, John Cullinane, explained that its most significant measures are changes to corporation tax and to the tax regime affecting non-UK domiciles. The sections dealing with corporation tax loss relief and interest deductibility, he noted, run to a staggering 303 pages between them, almost half the length of the entire Bill.
He explained: “The Bill also contains clauses paving the way for Making Tax Digital, substantial changes to the rules for fulfilment businesses and a range of anti-avoidance measures, including penalties for enablers of avoidance schemes.”
These are all measures that will be handled automatically by compliant PAYE Umbrella Companies, freeing contractors to pursue their projects without fretting about burdensome administration.
Mr Cullinane drew attention to the fact that despite the splitting of the pre-election Bill, the current Bill will be the second-longest Finance Act in history if passed intact. It is just 29 pages shorter than the massive 703-page Finance Act of 2012.
He added: “While much of the new legislation will only apply to larger businesses, this will still represent a further complicating of the tax system, both by lengthening the code and through the process of change. Feedback from taxpayers indicates that the pace of change itself is one of the biggest factors in making the tax system complicated for its users.”