Consultants attack tax proposals

The Confederation of British Industry, the Law Society, and several accounting bodies met with the Inland Revenue last week to fight for a change in proposed taxation reforms.

The controversial proposals, made in the budget in March, would change tax law in a way that, the CBI argues, would result in many contractors and consultants paying more tax.

The proposed new rules are designed to prevent people setting up companies and hiring themselves (and thus paying less tax), rather than trading as self-employed workers or joining the staff of the company they work for.

This would have a particulary dramatic effect on the IT industry, where a large number of IT contractors operate through their own service companies, paying less tax and national insurance.

However, critics told PC Week that the government's reforms could result in consultants being forced to become employees of the firm that hires them, or to work on fixed-price contracts, rather than being paid by the hour.

IT consultants warned that either action would make their services more expensive.

"The (tax change) is a sham, and will not work," said Andy White, an IT contractor.

Last week's discussions with the Inland Revenue are unlikely to result in a change of the law, which will come into effect next April.