date posted: 25-11-2016

Following the announcement of the Autumn Statement this week, the Chancellor has stated his plans for substantial spending within the construction industry and outlined other changes set to take place next year.

 

The government pledges to invest £2.3bn on a Housing Infrastructure Fund to deliver infrastructure for up to 100,000 new homes in areas of high demand. He added there will be £1.4bn to deliver 40,000 additional affordable homes. In addition, the statement also included a spend of £2.6bn on transport networks including £220m to address traffic pinch points, £450m on digital signalling and £390m on low emission vehicles.

 

Other key points at a glance:-

 

  • The new 16.5% VAT flat rate will take effect from 1 April 2017 for businesses with limited costs. In the technical notes, HMRC have defined a limited cost trader as one whose goods purchased are less than 2% of the vat inclusive turnover and a minimum of £1,000 per annum must be spent. Goods for this purpose must be exclusively for the purpose of business however it excludes costs incurred for capital expenditure, food and drink and vehicles (including parts and fuel). Draft legislation concerning this will be published on 5th December after which we will communicate further details.
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  • Reforms to IR35 in the public sector are set to go ahead in April 2017. The changes, which will see contractor engagers (government bodies and agencies) assume responsibility for confirming contractor status and the deduction of the associated tax liability. Additionally, the 5% allowance will be removed for those contractors affected by the IR35 changes.
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  • Personal Allowance for tax (this is the amount of income you can earn before you start paying income tax) is set to be increased to £11,500 in April 2017 (currently set at £11,000). The higher rate threshold of income tax will also increase from the current £43,000 to £45,000 in 2017-18.
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  • Employee and Employer thresholds for National Insurance are to be set in line with each other in April at £157 per week.
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  • For those aged 25 years and over, the National Living Wage will increase from £7.20 per hour to £7.50 per hour in April 2017.  The National Minimum Wages for those under 25 will also increase in April in line with the NLW and will be set as follows: -

 

for 21 to 24 year olds – from £6.95 per hour to £7.05

for 18 to 20 year olds – from £5.55 per hour to £5.60

for 16 to 17 year olds – from £4.00 per hour to £4.05

for apprentices – from £3.40 per hour to £3.50

 

  •  For those in tax avoidance schemes, a new penalty is being introduced for those helping someone else to use such schemes. Tax avoiders will face new penalties and those who help them will also face the consequences. Also, tax avoiders will not be able to claim as a defence against penalties that relying on non-independent tax advice is taking reasonable care. ·
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  • From April 2017, the government has announced that most salary sacrifice schemes will be subject to the same tax as cash income. Engaging in salary sacrifice schemes, the employees exchange some of their salary for a non-cash benefit in kind making a tax saving for both employer and employee (all arrangements in place before April 2017 will be protected for up to a year, and arrangements in place before April 2017 for cars, accommodation and school fees will be protected for up to 4 years). However, salary sacrifices regarding pensions, pensions advice, childcare, Cycle to Work and ultra-low emission cars will be exempt.
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  • The Chancellor has also announced that Insurance Premium Tax (IPT) will also increase from 10% to 12% with effect from 1st June 2017.
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  • Finally, the government has announced its plans to abolish future Autumn statements in favour of a Spring Statement. This means that the full budget (usually announced in March) will now take place in November to streamline the process of new legislation coming into force.
 
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