The first was the deferral of new laws to stop business owners gaining a tax advantage by ‘income shifting’. This postponement of 12 months for further consultation came as a welcome relief to many contractors who were facing the prospect of massively increased administrative duties. The Family Business Tax legislation, if introduced, will extend to any small businesses where a person is distributing company profits to more than one person, not just to ‘family’ members per se. Companies will have to record and rate every task they do, to prove that their position in the company is genuine.

The second point raised, rather subtly, was the increasing onus on Umbrella Companies to shape up on expenses. The Budget stated that it is ‘concerned at the growing use of structures, such as ‘Umbrella Companies’ or overarching contracts of employment with employment businesses, to obtain tax relief for travel expenses that would not be available to other workers’. To scrupulous umbrella services this is a welcome motion, as long as it means stricter enforcement of current legislation rather than an increase in legislation. For contractors using umbrella services, it should come as a warning. If your umbrella service is working on the edge of the legislation, it won’t be for much longer!

It seems that the Budget of 2008 is simply a build up to what is likely to be an important Budget for IT Contractors in 2009.

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