Contractors last weekend abandoned hopes of retaining their right to avoid National Insurance (NI) contributions, by endorsing a compromise with the Inland Revenue.
The British Computer Society's contractor group annual meeting in Bath voted almost unanimously for a scheme under which freelancers working through single person companies would pay themselves a statutory minimum wage of around £15,000.
NI must be paid on wages, so the scheme would end contractors' practice of avoiding the levy by paying themselves solely through lightly taxed company dividends. The group was reacting to Inland Revenue plans - known as IR35 - to change single-person companies' tax status. Contractors say the plans will snatch an extra 25 per cent of their incomes.
"Parts of the Revenue initiative are quite right," said the contractor group's chairman, Mike Cullen, adding that IR35 would help badly paid workers whose bosses use single person firms to dodge employers' NI contributions.
But the fractious meeting of 60 contractors showed great hostility to IR35, with many present determined to continue the fight for benefits such as tax allowances.
Cullen said Inland Revenue has already shifted from its initial demands: "The position has moved from the Revenue telling contractors they can't be in one person companies or all the tax and NI will be taken, to them not minding as long as we don't pay dividends."
The committee recommended freelancers join the non profit making Professional Contractors' Group, formed recently by 2,000 freelancers to lobby for their financial interests.
The meeting closed by rejecting the Channel Islands as 'inappropriate' for next year's venue.
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