Tax audit concerns raised

News Article - 23 May 2012
Category: Business

Chancellor George Osborne is to announce this week proposals to merge income tax and national insurance contributions in a bid to simplify the tax administration process for small and medium-sized enterprises (SMEs).

Mr Osborne is looking to aid SMEs in particular as the Chancellor works on a financial package dubbed "a budget for growth".

Early indications suggest that a merger of income tax and national insurance contributions (NICs) would be a possibility according to the Office of Tax Simplification, although the process may be difficult to implement.

The merger will make it easier for the Government to deal with issues such as the taxation of the self-employed which has remained a bone of contention for numerous years.

The IR35 legislation has also been an issue with small businesses and freelancers for a number of years and the integration of income tax and NICs could make this obsolete.

Chris Bryce, chairman of the Professional Contractors Group, said: "Should the Chancellor accept the recommendation to abolish IR35 this would be a major advance towards honest, transparency and fairness for the freelance community.

"We have been telling the Government and all interested parties that IR35 was not fit for purpose. We now call on the Chancellor to opt to suspend IR35 with the view of permanent abolition. This would remove a shadow that has hung over the UK freelance community for over a decade and be a massive vote of confidence in this skilled and flexible community."

However, some will regard the resultant tax merger as an actualincreasewith some marginal rates reaching more than 50 per cent.

The Government is also likely to raise the basic rate income tax threshold, which ironically goes against the aims of the Liberal Democrats who were keen on excluding all those earning £10,000 or less from paying tax altogether as part of the Coalition agreement.

SMEs will certainly welcome the simplification of tax administration, with many businesses now urged to implement accounting software to automate and speed up day-to-day financials processes.

Article keywords: Chancellor, George Osborne, income tax, national insurance, tax administration, small business, medium-sized enterprises, SME, NIC, Office of Tax Simplification, IR35, Chris Bryce, Professional Contractors Group

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