Income Shifting Legislation

The majority (73.25%) of contractors think that the impending legislation to effectively outlaw Managed Service Companies is unjustified and that it reflects an overall distrust of the self-employed by the British Government. Although over half (59.3%) say that they don't fully understand the proposed legislation or the Government's reasoning behind it, the vast majority feel that contractors are being unfairly 'picked on'.

This view has emerged from a survey carried out by JSA, a leading specialist IT Contractor accountancy firm.

39.5% of respondents say that the new legislation has affected their future plans to work as contractors and of these, more than half (52.9%) say that they will now be looking for a permanent job and expect to earn less as a result.

Over a third (34.9%) have been approached by companies offering a 'way round' the proposed legislation, but of those that have been solicited, less than a quarter (23.3%) have bothered to investigate their claims further.

"It is hardly surprising that contractors are disillusioned by this latest raft of legislation," says Barry Roback, Chief Executive of JSA. "The impending changes have created a lot of extra work - both for contractors and their accountants - without any obvious advantage to anyone. Admittedly there were some rogue operators among firms operating managed service schemes and probably the odd contractor who had pushed credibility to the limit, but it would seem that the Treasury has got the scale of the problem out of proportion."

Roback believes that the Treasury has got it wrong if it believes there is a vast quantity of unpaid tax waiting to be harvested from contractors. "It doesn't matter how often we tell Treasury officials that the majority of contractors are self-employed because it offers a lifestyle that suits them, they refuse to believe it. I suppose if you have spent your life in the stable environment of the civil service, it may seem difficult to understand why anyone would choose the comparative insecurity of contract work. But the simple fact is that they do, and their motivation is not necessarily purely financial."

While JSA specialises in acting for highly paid professionals, Roback does acknowledge that where the proposed legislation will bite is at the low paid end of the market where Composite Company solutions were often used in situations where they had no right to be.

He also makes the point that the constant crackdowns on the genuinely 'self-employed' professional might gradually turn Britain back into the kind of inflexible economy we had thirty years ago, and will almost certainly result in the UK loosing its EU competitive edge.