Alistair Darling plans further controls for Tax Avoidance in Pre-Budget Report (PBR)

Date: November 09, 2009

The Chancellor is expected to use the PBR in early December to outline strict measures to narrow any possibility of tax avoidance by individuals.

HM Revenue & Customs (HMRC) are also closely monitoring any tax avoidance scheme and a spokesman said that changes in law may take place if required.

The Professional Contractors Group (PCG) has expressed concerns about the new tax avoidance guidelines. Chris Bryce chairman of PCG has requested not to make effective some new rules to the Chancellor in order to help contractors and freelancers through the recession period. Mr Bryce wrote a letter in which he states that the new legislation only brings uncertainty for freelancers and that the UK’s current legal and regulatory framework does not offer freelancers a “fair deal”.

The letter to Alistair Darling requests a postponement of the Income Shifting legislation with regard to family business tax as the proposal fails to recognise that jointly own business involve share of risk and responsibilities and could harm thousands of enterprises. the letter also highlights that the changes in IR35 are an impediment for freelancers and also outlines the problem that the new tax rule prohibits agencies, in practice, from paying freelancers gross unless they have a legal form.

“PCG want to see the new measurers of IR35 and income-shifting abolished as it is a clear example of a tax measure distorting market behaviour, contrary  to the Government’s own express desire that “the tax tail should not wag the business dog” Mr Bryce had added.

In the meantime the Government expect tax rate to raise nearly £3 billion by 2012 and has already closed a potential loophole by cutting the tax relief available on pension contributions from 40 per cent to 20 per cent for earners above £150,000 per year.