Freelance consultant says his tax and NI now double his employed years

Graham,

Thanks for entering the lion's den and entering into a discussion with us, this has been sadly lacking from anybody else.

Firstly, if you read no others please read the response from PCG Chairman, Gareth Williams.

I would like to make a couple of points on my behalf only.

I worked for 9 years at a large American database and consultancy company where I was a Senior Consultant. 5 years ago I left and formed my own consultancy company. In this time I have had 15 - 20 clients. It is my opinion, from looking at other people's experiences and correspondence that if I sent my contracts into the Inland Revenue they would adjudge them inside the IR35 regulations. Instead I have asked for independent legal advice, which has advised I am outside, but also said this is a very subjective area and the Tax Commissioners can make apparently contradictory judgements.

My business has been quite successful and my total tax and NI contribution (including employers NI) is now about double that when I was employed by the American Consultancy.

I can see there was some potential to use Limited Companies as a tax avoidance vehicle, but that was certainly not the reason I went contracting, nor anybody that I know.

The reason why this potential exists is firstly the removal of the ceiling on Employers NI and secondly the introduction of a 10% corporation tax rate, which artificially distorts the market (and discourages us from taking on further employees).

I don't object (too much!) to paying more tax, but it must be done on a fair basis. I spend large amounts on equipment, training, legal, insurance, accountancy, etc and it is totally ridiculous that these expenses should come out of taxed income.

An early survey of PCG members showed us (including myself) to be predominantly New Labour voters, (and indeed a prominent PCG member is a Labour Candidate at the forthcoming election), but there will be few votes for Labour from within our ranks now.

If you would be prepared to meet some of us, so we could give you our viewpoint and an opportunity to ask questions and concerns as to how we run our businesses, I'm sure we could convince you that this measure is ill targeted.

Kind Regards

PeteB