Autumn Statement 2023: The Key Points for Construction Companies

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  Posted by: electime      24th November 2023

The Chancellor’s Autumn Statement has brought about a number of changes that will impact construction businesses and those individuals who work in it across the UK. For construction companies, there are several key points to be aware of. Here, Indigo Group runs through an initial summary of the highlights and challenges ahead:

Construction Industry Scheme (CIS) reform

The Government will introduce reforms in the Autumn Finance Bill 2023 to the Construction Industry Scheme, including adding VAT as part of the Gross Payment Status (GPS) compliance test, giving HMRC more power to remove GPS immediately in cases of fraud.

In the changes announced, contractors and subcontractors will have to undergo VAT record scrutiny as a statutory component of the CIS compliance evaluation. Previously, compliance criteria was limited to turnover and business assessment tests to receive gross payments under the scheme. The government emphasised that the inclusion of VAT checks will enhance HMRC’s authority to swiftly revoke Gross Payment Status.

National Insurance

Recognising the cost-of-living crisis, the Chancellor abolished Class 2 National Insurance for the self-employed saying this would benefit nearly two million self-employed people. The further announcement that the self-employed will also pay Class 4 National Insurance at 8% down to 9% means that taken together, these measures will save self-employed workers on average £350 per year.

The new employee NIC rates will apply equally to directors. It’s important to note that the continued freezing of the personal allowance and basic rate tax threshold until 2027/28 will reduce the actual benefit realised by individuals. This will impact both employees and self-employed workers in the construction industry.

Full Capital Expensing Regime

Another key change for construction companies was to make the temporary full expensing regime permanent. This will allow businesses to deduct the full cost of qualifying capital assets from their taxable profits in the year of purchase. This could be particularly beneficial for construction companies looking to invest in new equipment, as it will provide a significant tax break. For example, a construction company that purchases £100,000 worth of qualifying capital equipment would be able to deduct the full cost from their taxable profits, resulting in a tax saving of £19,000 or £25,000 depending on their business size.

Investing in housing supply

The Chancellor’s announcements also included various measures on new housing, with £110m to unlock 40,000 homes over the next 5 years, £32m to ‘bust the planning backlog’ and £450m to the Local Authority Housing Fund to deliver 2,400 new homes.

Increase apprentices and tax deductions on training costs 

£50m in funding was announced for a 2-year pilot programme to increase the number of apprentices in engineering and “other key growth sectors”. Given the significant shortage in skills that the construction sector is currently seeing, this seems woefully inadequate.

HMRC will also rewrite guidance around the tax deductibility of training costs for sole traders and the self-employed, to provide more clarity to business on what costs are deductible. This will ensure that individuals can be confident that updating existing skills, or maintaining pace with technological advances or changes in industry practices, are allowable costs for tax purposes

SME cash-flow implications of late payment 

Any company bidding for large government contracts should demonstrate they pay their own invoices within an average of 55 days, which will reduce “progressively” to 30 days.

IR35 Legislation

HMRC plans to reduce the PAYE liability of a deemed employer to account for taxes paid by a worker and their intermediary on payments received where an error has been made in applying the off-payroll working rules. It is good to see Government addressing the unjust issue of potentially over-collecting tax and National Insurance contributions in cases of non-compliance with the off-payroll working rules.

Tax avoidance measures 

The Government confirmed plans to introduce a criminal offence for promoters of tax avoidance who continue to promote avoidance schemes after receiving a Stop Notice. They will also introduce a new power enabling HMRC to bring disqualification action against directors of companies involved in promoting tax avoidance. Those committing the most serious forms of tax fraud will now be faced with a doubling of prison sentences to 14 years.

Overall, the Autumn Statement was quite pro-business including several elements that will positively benefit construction companies. However, the measures fell short of the long-term strategy for growth that the country needs. The lack of major announcements specifically dealing with the skills shortages the country faces was very conspicuous. Hopefully, these things will be rectified in next Spring’s budget.

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