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Contractors need to be careful they are not being exploited

It has never been more important for contractors to have a specialist contractor accountant they can refer to before accepting desperately needed work. Tax campaigners are expressing grave concerns about the proliferation of companies exploiting low and moderate earners by requiring them to work through personal service companies. This enables employers to avoid paying tax and NIC.

According to the Low Incomes Tax Reform Group (LITRG), many workers or contractors have been told by their employers that they must provide their services through a limited company or some other similar arrangement, or risk not getting any work. Under current tax rules, employers are not, theoretically, committing an offence – instead, it is the contractor or employee who could fall foul of the tax rules. The rub here is that should individuals refuse to accept these conditions and therefore fail to find work as a result, they could also lose benefits.

LITRG is currently lobbying for HMRC to crack down on such aggressive tactics, adding that companies avoiding NIC could also be avoiding other employment obligations as well. It is being proposed that HMRC should have the capability to pursue companies that wrongly force individuals into these arrangements. Contractors caught in them may not realise the implications of the resulting costs they are liable for. Here, a cheap accountant for contractors could be particularly helpful in protecting individuals from falling foul of HMRC as a result of being employed in this way.

Posted by Louise
November 26, 2012
HMRC

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