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| CURRENT SECTION :: Money | UK's most visited IT Contractor Site - 250k unique visitors March 2008 |
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They may not understand it or be able to explain why it is about to be introduced, but most IT contractors insist that new anti-avoidance legislation is simply an attack on freelance working. The new legislation, part of the Finance Bill 2007, due to get Royal Assent next month, will effectively outlaw Managed Service Companies (MSCs) as a device to minimise tax. Unveiled in December last year, the legislation is designed to ensure MSC users pay their “fair share” of tax – PAYE and NICs – as their ‘work relationship is akin to employment.’ But almost six out of ten IT contractors take issue with these claims from the Treasury, saying they don’t understand the legislation or the motivation behind introducing it. The confusion explains why the impending laws are being seen as state-conceived attack on freelance contracting In fact, over 70% of IT contractors say the new laws are evidence they are being “unfairly picked on” by the government. “Admittedly there were some rogue operators among firms operating managed service schemes and probably the odd contractor who had pushed credibility to the limit,” said Barry Roback, chief executive of JSA, which commissioned the findings. “But it would seem that the Treasury has got the scale of the problem out of proportion.” A poll by Contractor UK in March echoed the accountancy firm’S findings - that contractors feel the government is legislating out of its distrust of the self-employed. At the time, a CUK spokeswoman said: “It's interesting that some contractors said they think this legislation is just part of an inevitable ongoing Revenue attack. “Freelance contractors are a valuable section of our flexible workforce, and once again, they feel victimised about this assault on their livelihoods.” Ambiguity over the new laws has convinced less than a quarter of IT contractors to accept invitations from firms claiming to offer ‘a way round’ the new laws, according to the JSA poll. And while one in three contractors say they will feel the impact of the legislation, more than half are about to abandon plans to freelance for safer, less lucrative, permanent work. One major IT recruiter yesterday said it was “too early” to notice any adverse fluctuations in the contract market brought on by the anti-avoidance laws. “We are spending a lot of time looking at it [the legislation] and it doesn’t help that the law is a little grey,” said Simon Pettit, product director at Computer People. He added: “We’ve got some educating to do, with our clients as well, to explain the potential implications of not being compliant within the MSC arena. “We are currently doing a lot of work with our existing contractors to make sure they are compliant because some will be hurt by the legislation.” Asked in March about MSC laws, one IT contractor responded: “I have no idea why I have to play this game; in most other countries the taxation is far far simpler for temporary professional work.” JSA indicated that making representations to the government about the plight of non-permanent IT professionals, in wake of the new laws, was futile. “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,” Mr Roback said yesterday. He added: “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.” Previous Page
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