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Contractors to face new tax compliance evidence requirements

Businesses and contractors alike aren’t looking forward to new tax compliance rules that  require them to meet heightened evidence requirements.

I don’t know about you, but I always get a bit spiky when the government steps in and tries to ‘help’ or make things better, and this could very well be one of these times. The government is convinced that the best way to stamp out the very real problem of tax avoidance is to encircle our freelancers, contractors, and small businesses in more paralysing red tape. These new rules, which will go into effect on 1 April, will not only require anyone applying for a public sector contract to produce evidence that they have not been engaging in any tax avoidance, while also making it a requirement to have a supplier disclose any pat misdeeds such as having a tax related offence conviction or being slapped with a evasion or civil fraud penalty.

Danny Alexander, chief secretary to the Treasury, commented on the new law, remarking that it’s important to convey the message to public sector contractors that there’s no place in the UK for aggressive tax avoidance, adding that this was the main motivation behind these new rules designed to limit the impact of firms and individuals trying to pull the wool over the eyes of HMRC. The government is spending hundreds of millions of pounds in order to put thee rules into effect and providing for the infrastructure to enforce the new regulation, and Mr Alexander insists that the new General Anti-Abuse Rules will be just one more tool that will help the government weed out firms that have been involved in underhanded tax avoidance in the past.

Meanwhile, I have my misgivings about this plan. Does nobody seem to realise that this could have a chilling effect on the public sector if everyone has to jump through all these hoops  before even being able to be considered for a contract? Who’s going to want to put up with all this when you can simply find a private sector contract without all the hassle?

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