OTS’s review will focus on more than just IR35

The Office of Tax Simplification (OTS) is reviewing small business taxation which covers more than just IR35. Although much of the limelight surrounding the review has fixed itself on the infamous IR35, small business taxation covers a broader range of elements which could have a significant impact on the income and operating methods of Limited Company contractor.

We have outlined some areas which the OTS may review;

Disguised Remuneration

Many commentators within the industry believe that it is only a matter of time before HMRC reclassify dividend payments as being remuneration which would effectively mean those dividend payments would be subject to higher tax.

Example – PA Holdings Case in 2010 may be a sign of things to come

Husband & Wife Limited Companies

The announcement made by the Government to stop child benefit for families that have a high rate taxpaying spouse will likely lead to husband and wife companies to be reviewed by the OTS.

The fact that some contractors operating their own business can share income between spouses and even leave profits within their contractor limited companies to avoid the higher rates of tax, enabling them to still qualify for these benefits, certainly increases the likelihood that this area will come under scrutiny.

Defining a Professional Contractor

Independent body Professional Passport has been calling for a clear unambiguous way to identify;

Professional Contractors; “ those that see their long term career as a contractor, do not want any enhanced rights or protection and see themselves as operating their own business with associated risks” From;

Temporary contractors; “those that contract until they can find a new permanent position”

A clear set of criteria would allow appropriate legislation to be applied (i.e. IR35 or agency workers regulations would not apply to professional contractors).

You’re Views Matter

Professional Passport has been instrumental in giving contractors a voice. The Office of Tax Simplification is taking on board your views through the contractor polls and surveys, to help its mission to review the way small businesses are taxed including IR35.

Whether you are operating through a PAYE Umbrella Company or operate through your own Limited Company, your views matter. Visit www.professionalpassport.co.uk and share you rviews today.