• silicon.com
• Management
• CIO Insights

By Felicity Ussher, 11 March 1999 17:00

NEWS The UK Institute of Chartered Accountants has slammed Gordon Brown's supposedly 'high-tech friendly' Budget for hitting IT consultants where it hurts. The Inland Revenue aims to boost its annual revenues by hundreds of millions pounds each year by reducing tax relief to companies with only one employee. It claims many individuals are setting up full-time contracts with their employers purely to gain a more lucrative tax status. But Peter Bickley, technical manager for the tax faculty at the Institute, said the Budget has undermined the UK government's pledge to boost the IT industry. "Many of the best people in IT work on a contract basis for big companies," he told Silicon.com. "This measure will harm their flexibility, and if they are forced back into long-term employment, it will be bad for the economy as a whole." Many IT consultants set up contracts with large companies while they are installing a suite of programs. Rather than work as freelances, which would require PAYE (pay-as-you-earn) Income Tax and National Insurance (NI) to be deducted from their fees, many set themselves up as limited companies. An Inland Revenue spokeswoman said: "The measures are not intended to stop people being genuinely self-employed. It is aimed at firms trying to avoid tax and NI, and it offers protection for employees who are forced into becoming limited companies in order to remain attractive." She said that from April, the Inland Revenue will ensure that self-employed people who operate via a limited company have a range of employers, and do not change their tax status from Friday to Monday while staying in the same job. Buckley conceded that there is a competitive issue, as companies which contract in experts will be in a stronger position than businesses with in-house staff. But he said the government has missed the point. "This seems such an odd thing to do in a dynamic work environment. The government is ignoring an overwhelming trends toward outsourcing and contract payments in all sectors."