Is the Chancellor going to clampdown on composites?

by Susie Hughes at 10:27 01/12/06 (Political News)

Chancellor Gordon Brown could be preparing to clampdown on composite companies in the forthcoming Pre Budget Report, according to accountants Grant Thornton.

Mr Brown will deliver his tenth - and last - PBR on December 6, 2006 and Grant Thornton expect it to be 'business-friendly' as he seeks to leave a favourable legacy. However, Grant Thornton has predicted a number of areas where the Chancellor could take action and one of them is composite companies. Advertisement Composites companies grew in IT contracting after the advent of IR35 and have spread to other industries and currently the largest growth market is in construction. Grant Thornton claims that given the number of engagements between employers and contractors operating under these arrangements, it is very difficult for HMRC to determine the employment status of the people whose services are being supplied. At the time of the Budget in March 2006, it was announced: "The Government believes that all individuals and businesses must pay their fair share of NICs and tax, irrespective of legal form. It will continue to review the tax and NICs systems to ensure that this is the case and will bring forward proposals for discussion that are consistent with simplicity for compliant businesses, support for businesses in their aspirations to grow and maintaining the attractiveness of the UK as a business location. As the first stage of this review, the Government will consult on action to tackle disguised employment through managed service company schemes." Grant Thornton predicted this could mean a clampdown on composite companies. Stephen Quest, Tax Partner said: "The Government could follow up this threat with some action in the Pre-Budget Report. They could make these companies operate PAYE on a larger proportion of the income, put the onus operating PAYE on the engager, or even consider introducing NIC on dividends paid by these companies." Pre Budget Report coverage Shout99 will be providing 'live' coverage of - and reaction to - the issues in the PBR (December 6) which could affect small businesses. You can subscribe to this section by logging in or registering on Shout99 and clicking on the 'Change Subscription' button at the top of this page. We'll then send you an email summary of articles posted in this category. -- If you wish to comment on this article, please log in and use the Reply button below. Registering is free and easy - see 'Join Shout99'. - Susie Hughes © Shout99 2006

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