Contractors in the UK, particularly within the IT sector, will have been taking a good, hard look this week at the contents of Chancellor Alistair Darling's recent budget, which contained a number of measures likely to affect them over the coming year, both positively and negatively.

Given the current dire straits that the government currently finds itself in economically, matters such as IR35 have slipped down the agenda somewhat, although a "legislative solution" has been threatened to deal with 'false' self-employment in the construction industry in particular.

However, a number of the measures that the government has pledged to take in the coming tax years to clamp down on avoidance are likely to impact on contractors employing such techniques to maximise their revenues.

In an attempt to crack down on payments that the government deems to have been 'disguised' in various ways, and effectively closing the offshore path for contractors, the Budget contained changes to the Disclosure of Tax Avoidance Schemes regime, including, according to the Treasury "enhanced penalties for failure to disclose a scheme, a requirement for promoters to provide lists of clients to whom they have issued scheme reference numbers, and amendments and additions to the “hallmarks” (descriptions of schemes required to be disclosed), including some particularly targeted at taxpayers attempting to avoid paying the 50 per cent rate of income tax".

It revealed that: "Regulations implementing the measures will be introduced in the summer and are intended to be effective from the autumn."

Additionally of interest to contractors who are directors of their own company are measures designed to counter avoidance involving the release of loans to participators by close companies. From the date of the announcement, close companies will be denied a corporation tax deduction for releases or write-offs of loans to participators, the Treasury has revealed. Previously, such a loan could be written off (albeit with the appropriate tax and National Insurance Contributions payable), representing a financial benefit to the contractor in question.

Potentially affecting contractors with a corporate presence, the government also announced, with immediate effect, a measure to combat avoidance schemes targeting the rules relating to Share Incentive Plans (SIPs).

"The measure denies a deduction for corporation tax where the main purpose or one of the main purposes of the company making a payment is to obtain a tax deduction. This measure also strengthens the rules for withdrawing SIP approval where companies enter into transactions that manipulate the value of SIP shares," the Treasury stated.

However, it wasn't all bad news for contractors. The extension of the 'Time to Pay' scheme for a further five years, the announcement that the HMRC's Employer Compliance Review process iss being "re-engineered" (likely to result in a drop in IR35-related investigations), and the doubling of the investment allowance from GBP50,000 to GBP100,000, and of the entrepreneur's lifetime CGT relief, from GBP1m, to GBP2m have all been welcomed as positive measures.