http://www.telegraph.co.uk/money/mai...20/cntax20.xml
http://www.telegraph.co.uk/money/mai...0/ccom20.xml#1
Urgent talks to toughen rules for contract workers
By Roland Gribben
Last Updated: 3:20am GMT 20/03/2007
Comment: Banking sector stirs...and Barclays has its work cut out
Treasury officials are engaged in urgent talks with tax experts in advance of tomorrow's Budget to tighten new regulations aimed at ending tax avoidance schemes used by up to 250,000 contract employees.
Mr Brown is anxious to ensure that the new regulations are watertight
The schemes are mainly used by those working in the IT industry, but also by nurses, teachers and others. The Treasury is concerned that efforts by advisers to find a way around the rules will thwart attempts to plug the loophole and raise an extra £1bn for the exchequer.
The Chancellor is anxious to ensure the regulations are watertight. He has already been forced into a U-turn on a pre-Budget tax avoidance measure aimed at 5,000-6,000 wealthy individuals, including City traders, benefiting from "sleeping partner" status in companies with an investment risk.
Business advisers have moved swiftly to recommend contract workers switch from using the managed service companies targeted by the Treasury to setting up a personal service company to protect their tax cushion through director status.
Treasury officials are understood to have called in senior figures in the tax "industry" yesterday to discuss the issues and scope for beating the new rules amid confusion about whether the personal service company alternative is a "runner", and criticism about the quality of advice being offered to contract workers facing the loss of a tax perk.
John Chaplin, a director at KPMG, the accountancy and consultancy business, believes contract workers are not being fully briefed by promoters of the new schemes about how they can protect their current tax status. He said: "We have looked at some of the literature being sent out and feel it doesn't present the full picture. In fact we think they are providing misleading information."
advertisement
Thousands of contract workers have rushed to register their own companies ahead of the new tax year.
Companies House is struggling to cope. Some banks, wilting under the weight of new business, have been offering the equivalent of "virtual bank accounts" to cope with the backlog.
Treasury and Revenue & Customs officials are confident the new legislation is strong enough to survive the efforts to find a safe tax passage through the regulations but are worried at the prospect of administrative delays in tax collection.
Urgent talks to toughen rules for contract workers
The Chancellor is struggling to get all his tax ducks in a row. Hardly surprising because the Treasury pond is full of them.
The managed service companies that look after contract workers are proving particularly awkward. They provide a convenient shelter for an estimated 240,000-250,000 contract staff, mainly in the IT industry, to offset tax on earnings and frustrate the taxman's attempt to bring them into the net. Brown has attempted to change the rules, but this just provided another demonstration of the inexhaustible imagination of tax advisers. In place of the managed company, the tax experts now suggest they become a personal service company complete with director status for the individual and tax "protection".
As a result Companies House has been flooded with new registrations while banks have been forced to offer "virtual" bank accounts to cope with the rush of new business before the tax year-end. There is another by-product - an exasperated Chancellor, dismayed at seeing his tax avoidance crusade run into more trouble.
There is of course no guarantee that the personal company provides an escape route for the fleet of foot and agile mind but the Treasury has been burning the midnight oil to ensure the new tax noose is uncomfortable enough to cut short the elevated status of a new breed of directors.
Treasury mandarins were huddled in discussions with some of the City's finest tax brains yesterday to ensure that there are new measures in the Chancellor's red box by 12.30pm tomorrow.
One wonders, however, if, in their haste to rush through new legislation, these Treasury officials will end up with something just as inadequate. Once again, the only winner will be the tax advisers.
http://www.telegraph.co.uk/money/mai...0/ccom20.xml#1
Urgent talks to toughen rules for contract workers
By Roland Gribben
Last Updated: 3:20am GMT 20/03/2007
Comment: Banking sector stirs...and Barclays has its work cut out
Treasury officials are engaged in urgent talks with tax experts in advance of tomorrow's Budget to tighten new regulations aimed at ending tax avoidance schemes used by up to 250,000 contract employees.
Mr Brown is anxious to ensure that the new regulations are watertight
The schemes are mainly used by those working in the IT industry, but also by nurses, teachers and others. The Treasury is concerned that efforts by advisers to find a way around the rules will thwart attempts to plug the loophole and raise an extra £1bn for the exchequer.
The Chancellor is anxious to ensure the regulations are watertight. He has already been forced into a U-turn on a pre-Budget tax avoidance measure aimed at 5,000-6,000 wealthy individuals, including City traders, benefiting from "sleeping partner" status in companies with an investment risk.
Business advisers have moved swiftly to recommend contract workers switch from using the managed service companies targeted by the Treasury to setting up a personal service company to protect their tax cushion through director status.
Treasury officials are understood to have called in senior figures in the tax "industry" yesterday to discuss the issues and scope for beating the new rules amid confusion about whether the personal service company alternative is a "runner", and criticism about the quality of advice being offered to contract workers facing the loss of a tax perk.
John Chaplin, a director at KPMG, the accountancy and consultancy business, believes contract workers are not being fully briefed by promoters of the new schemes about how they can protect their current tax status. He said: "We have looked at some of the literature being sent out and feel it doesn't present the full picture. In fact we think they are providing misleading information."
advertisement
Thousands of contract workers have rushed to register their own companies ahead of the new tax year.
Companies House is struggling to cope. Some banks, wilting under the weight of new business, have been offering the equivalent of "virtual bank accounts" to cope with the backlog.
Treasury and Revenue & Customs officials are confident the new legislation is strong enough to survive the efforts to find a safe tax passage through the regulations but are worried at the prospect of administrative delays in tax collection.
Urgent talks to toughen rules for contract workers
The Chancellor is struggling to get all his tax ducks in a row. Hardly surprising because the Treasury pond is full of them.
The managed service companies that look after contract workers are proving particularly awkward. They provide a convenient shelter for an estimated 240,000-250,000 contract staff, mainly in the IT industry, to offset tax on earnings and frustrate the taxman's attempt to bring them into the net. Brown has attempted to change the rules, but this just provided another demonstration of the inexhaustible imagination of tax advisers. In place of the managed company, the tax experts now suggest they become a personal service company complete with director status for the individual and tax "protection".
As a result Companies House has been flooded with new registrations while banks have been forced to offer "virtual" bank accounts to cope with the rush of new business before the tax year-end. There is another by-product - an exasperated Chancellor, dismayed at seeing his tax avoidance crusade run into more trouble.
There is of course no guarantee that the personal company provides an escape route for the fleet of foot and agile mind but the Treasury has been burning the midnight oil to ensure the new tax noose is uncomfortable enough to cut short the elevated status of a new breed of directors.
Treasury mandarins were huddled in discussions with some of the City's finest tax brains yesterday to ensure that there are new measures in the Chancellor's red box by 12.30pm tomorrow.
One wonders, however, if, in their haste to rush through new legislation, these Treasury officials will end up with something just as inadequate. Once again, the only winner will be the tax advisers.
Comment