The UK government will struggle to resolve all issues surroundings its new tax rules for self-employed workers by next April, a leading tax lawyer has warned.
PricewaterhouseCoopers tax partner John Whiting said the government had moved away from its initial "disastrous" IR35 proposals in favour of a more workable solution, but had yet to provide certainty on many points.
The so-called IR35 proposal will see thousands of IT contractors, who sell their services via limited companies, taxed in the same way as full-time employees.
At present, contractors who work through their own companies are able to avoid National Insurance contributions by paying themselves via lightly taxed dividends rather than salaries.
Under the news rules, contractors will have to assess whether they are true freelancers or de facto employees.
Workers in the former group will be able to continue operating as before, while those in the latter group will be subject to the new rules.
Whiting said the government had not indicated how it would treat those who were non-residents or self-employed for part of a tax year.
It has yet to specify exactly what constitutes self-employment and where the dividing line lies, and this places many contractors in an uncertain position.
Some might have to change their contract terms with employers to reflect their changed status, Whiting said.
For their part, employers would need to revise their contract terms and conditions to ensure there were not repercussions for them if their contractors were caught out by the new rules.
"I doubt whether all thse issues can be sorted out by 5 April 2000," Whiting said.
Whiting also warned that contractors would suffer "horrendous" administration costs under the new regime.
"There isn't much sympathy about the extra burden [from the Inland Revenue]," he said.
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