Revenue challenged on personal services companies

Professional and trade bodies will clash with Inland Revenueconsultancy crackdown. officials today as the two sides meet for the first time since the government announced its crackdown on personal services companies.

The meetings follow protests at proposed rules targeting tax and National Insurance avoidance by employees setting themselves up as companies.

Groups representing professions as disparate as IT consultants and hairdressers argue that the proposed rules cast too wide a net and will ensnare many involved in legitimate business arrangements.

Representatives of bodies, including the Chartered Institute of Taxation and the English ICA, met on Monday to discuss tactics for two Revenue meetings being held today and tomorrow.

Anne Redston, chairman of the CIoT’s personal taxes sub-committee, said they hoped to persuade the Revenue to reconsider both the scope of the proposals and the principles that lie behind them.

Particular concerns have been voiced at the impact of the proposals on small businesses.

A CIoT submission to the government last week said: ‘We are surprised the Revenue has adopted such a burdensome method of dealing with this relatively small area of tax risk. These proposals will add a whole layer of bureaucracy to businesses at a time when the government has made a commitment to cut red tape.’

The English ICA’s tax faculty said: ‘Application of the new rules will be aimed almost exclusively at inhibiting the growth of small businesses.’

Some fear the proposals could even ensnare accountants who undertake regular work for the same client.

By introducing the measures, the government has achieved an unusual degree of co-operation between rival institutes and trade bodies.

Last week, the English ICA, the CIoT, the Law Society and the Confederation of British Industry sent a letter to Paymaster General Dawn Primarolo expressing their concerns.