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Budget 2007 a mixed bag for IT Contractors
Posted Mar 21, 2007
The Professional Contractors Group (PCG) has given a mixed response to today’s Budget: its high-profile measure to tackle Managed Service Companies has been improved on paper but will still cause difficulties in practice.
PCG’s deputy chairman Chris Bryce commented, “It is good to see that the Chancellor has produced a more targeted definition of a MSC, so that freelancers using limited companies will clearly not be affected. The Government has clearly taken into account the outcome of its consultation exercise in this respect.
“Although PCG’s contact with the Treasury has produced this clarity there will still be contractors who will be confused about their future: they should seek advice immediately and ensure that they are using either a genuine limited company or a high quality PAYE umbrella, both of which are clearly outside the scope of the new rules.”
PCG is also concerned at the changes to corporation tax: the Chancellor appears to be making life easier for big businesses while penalising small ones with a tax rise. “The Chancellor claimed that the tax rise would be largely offset for many firms by the R&D tax credit and new environmental tax credit,” continued Bryce, “but in reality, whilst we recognise his efforts in this area, we believe that the uptake will be low. We need a simpler tax system, not one that is complicated by yet more tax credits.”
The Chancellor today referred to, “the new skills for the new jobs in the decade ahead.” PCG believes that an increasing proportion of the highly skilled workers of the next decade will work on a freelance and self-employed basis and reiterates its call for employment status to be clarified and set out in legislation.
“The confusion surrounding self employed, contractors and freelance status is the single biggest obstacle to the highly skilled flexible workforce that Mr Brown has said the UK needs,” added Bryce
“Tax measures such as IR35 and the MSC rules arise from the confusion around employment status. With this clarified, the tax system can be simplified, starting with the repeal of IR35. PCG members are frustrated that the Government fails to grasp this and instead persists with such hopelessly complex tax measures.”
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