Contractor tax anger refuelled

Changes to the government’s tax crackdown on personal services companies, expected to be unveiled shortly, are not expected to calm the anger over the controversial proposals writes Chris Quick.

Ministers are thought to have dumped the original definition of self employment for tax purposes, known as the control test, which would have brought many contractors into PAYE.

But it is understood that thousands of contractors and freelancers will still be severely hit under the modified proposals, which are not thought to go far enough to satisfy the numerous groups that have objected to the proposals.

Paymaster General Dawn Primarolo’s plans to clampdown on employees masquerading as self-employed contractors, revealed in the now notorious IR35 Budget press release, has provoked an extraordinary show of unity among business and professional groups.

The English ICA and the Chartered Institute of Taxation have been among the many groups opposed to the changes.

It is thought they were among those invited to a secret meeting last week at which the government unveiled the changes to its original plans.

But it is understood the meeting was held as a courtesy to the groups involved to show them the plans, rather than as an opportunity for the groups to comment.

The proposals are widely opposed because tax experts and professional groups say they are too widely drawn and will hit those who are involved in legitimate contracting arrangements.

Up to 70,000 individuals and businesses could be hit, mainly in IT and engineering.

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