Tax ‘to drain brains’

Accountants are to head an IT industry campaign against Budget changes designed to crack down on tax avoidance by independent consultants.

Senior accountants and representatives of the CBI’s taxation committee will this month launch Forum 2000, a group which aims to coordinate protests at what they fear will be a ‘brain drain’ of IT specialists from the UK.

Many IT consultants could be forced to become employees of the organisations where they carry out consultancy work, rather than charging fees through tax-efficient personal service companies, as they do currently.

Matthew Brown, chief executive of accounting specialists Giant Group, pointed out that IT specialists enjoyed tax advantages in many overseas countries, and said the Revenue’s moves could worsen the current shortage of IT specialists in the UK. BDO Stoy Hayward and JSA are among the accounting bodies involved.

Revenue representatives have been invited to the first meeting of the forum on April 21, where they could be called upon to defend the measures.

The Revenue argues new legislation is needed to counter avoidance in personal service provision, particularly by those who set up as full-time consultants to companies that previously employed them. The cost of such avoidance is estimated to be around #475m a year.

The Revenue has agreed, to consult about implementation with groups such as Forum 2000 – which wants the Revenue to deal with tax avoidance but maintain the status quo.

New legislation is expected to take effect from April 2000, and was not therefore included in the Finance Bill, published last week by the Treasury.

Changes in the Bill had already been comprehensively covered in the Budget.

KPMG tax partner Ian Stewart said the Bill did not appear to contain any ‘nasties’, adding: ‘We are still not seeing any indication of tax law simplification.’

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