Osborne turns his guns on the small business community as IR35 is back – big time!

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The Budget report includes the following paragraph:

2.207 Personal service companies and IR35

The Government will introduce a package of measures to tackle avoidance through the use of personal service companies and to make the IR35 legislation easier to understand for those who are genuinely in business. This will include:
-  strengthening up specialist compliance teams to tackle avoidance of employment income;
-  simplifying the way IR35 is administered; and
-  subject to consultation, requiring office holders/controlling persons who are integral to the running of an organisation to have PAYE and NICs deducted at source by the organisation by which they are engaged. (Finance Bill 2013)

I can see no press release so this is all we have to go on but let's consider this at face value.

What it says is that all IT contractors will in future have to have PAYE deducted from payments made to their companies BEFORE those companies get them. That's the end of their self-employments.

And the same will be true of the army of consultants working for government.

And anyone with most of their consulting income from one client.

How many people will this affect? Hundreds of thousands; maybe more.

Now I welcome this: these people are employees and should be taxed as such. That is obvious. An unlevel playing field has existed on this issue for far too long and as such I welcome this measure. But Osborne is going to alienate one of his key constituencies with this move by the look of it. And that's another political own goal by this supposedly most politically astute of chancellors.


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