Yesterday we saw George Osbourne deliver the Conservative summer budget. Some of the points that were raised could have an effect on the temporary labour market.
Below are some of the relevant measures that were highlighted;
Travel and Subsistence relief
A consultation document has been issued in relation to travel and subsistence claimed through intermediaries which will effect both umbrella employees and Personal Service Company directors. The focus of the consultation centres on the ability to claim such relief and will be determined on direction supervision and control.
The consultation runs until 30th September, with any changes expected to be implemented from 6th April 2016. We will provide a further update on this paper in the near future.
National Living Wage
This essentially is the replacement of the National Minimum Wage for workers aged 25 and over. Younger workers will continue to be covered by the National Minimum Wage. The new rules are to be implemented from April 2016 with the new pay rate to start at £7.20 which will rise up to £9 by 2020.
This allowance in relation to Employers National Insurance will be increased from £2000 to £3000 in April 2016. In relation to companies where the director is the only employee this will no longer be applicable.
From April 2016, the tax credit system for dividends will be replaced by a £5000 dividend allowance. The tax rates will be 7.5% for basic rate taxpayers, 32.5% for higher rate and 38.1% for additional rate taxpayers.
This will fall to 19% in 2017 and to 18% in 2020 which will help to counter some of the negative effects of dividend tax rates highlighted above as more profits will be available for distribution.
HMRC will be opening dialogue with businesses to improve the effectiveness of the existing IR35 legislation .Their aim will be to protect the exchequer and improve the fairness of the system.
We can offer you reassurance that at Sterling we always keep up to date with current legislation and adapt immediately to changes with as little effect on our contractors and recruiters as possible, but ensuring that in doing so we are fully compliant at all times, thus protecting you. We have recently had a full HMRC audit, and they were more than happy with how we operate and we have also had our dispensation renewed to include all the relevant expenses claimed by our umbrella employees.