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Office Hours: 9am to 5.30pm

Contractor taxation – time for a complete overhaul

With all the imminent changes to the way contractors are paid, it’s great to have a clear voice calling for legislation to be reviewed to benefit them.

PRISM

We recently announced that we had joined PRISM which is a leading trade body, representing the interests of contractors and the companies that provide services to the flexible workforce. We wanted to share an update from PRISM which makes a great deal of sense.

A strategic review

Crawford Temple, Chief Executive of PRISM believes that the only way that the Government will be able to achieve it’s stated aim of simplifying the UK’s tax regime is by carrying out an extensive review of the legislative framework relating to the contractor workforce.

George Osborne stated that it was the Government’s intention to create a level playing field, so that all workers, whether permanent or contract pay their fair share of tax. At the moment, the legislation that has been introduced will actually make the system less fair, especially for contractors who are providing specialist services that the UK economy needs.

Sticking plaster approach

Crawford believes that the way changes to legislation are being introduced are merely a sticking plaster which creates “a rally of market distortions”. Companies react to the legislation in different ways in an attempt to give their workers what they want whilst trying to follow the rules.

There’s a new way of working

The tax regime as it stands at the moment, was really designed to accommodate “employed” workers and “self employed” workers. There is now a third way of working – the “flexible” worker and this status needs to be recognized as it now accounts for over 10% of the UK working population.

This is why a top-down strategic review is required. At the moment, HMRC are changing existing legislation in an ad-hoc way, rather than taking a holistic view so that the law can be understood and applied in a fair way.

Certainty

Crawford believes that the overriding aim should be to give self-employed and flexible workers the same certainty around their tax affairs that the employed have. Until this aim is achieved it will be difficult for the flexible workforce to fulfill it’s potential.

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