There was a new attack on IT Contractors by the Chancellor today.
The Chancellor believes that there people out there using Limited Companies to avoid paying their fair share of tax. So, he is gunning for then from next year onwards.
He wants to put in place anti-avoidance measures aimed at shoring up the country‘s tax take.
It just depends what he sees as avoidance.
This was always going to be the problem when the Government were embarrassed by revelations in the Press about their own managers, even in the HMRC department, using Limited Companies.
Now they can see disguised-employees-under-the-bed everywhere.
It was predictable when the Government accepted the advice of the committee they set up to ‘look at‘ IR35 that abolishing IR35 would get contractors out of umbrella companies and into limited companies. So they decided to keep it in place. The government, therefore, favours Umbrella Companies for freelancers way above limited companies.
After all, they take in an estimated £2bn a year extra tax from 200,000 Umbrella Company contractors that Umbrella Company contractors pay in extra tax and NIC.
So, you could see what kind of contractors the Government would like best – especially in austerity times like these.
It stands to reason that the Government would like to see more and more contractors in Umbrella Companies. They’d like to see fewer in Limited Companies.
Extra Tax Money
This could be just the start of their vision of lots of extra tax money coming true.
To find more of these naughty limited company contractors who should really be in umbrella Companies the Government is going to beef up its specialist IR35 compliance team.
One would expect to see a growing percentage of contractors inside of Umbrella Companies. Also, expect to see a decreasing percentage of them using limited companies.
Limited Companies are bad for the Government‘s tax take.
Umbrella companies are good for the Government‘s tax take.
And turkeys don‘t vote for Christmas!
So, it’s a new attack on contractors by the Chancellor.