Categorized | news

Government cracks down on use of tax avoidance schemes

Even though the net is closing around the practice already, the Government is going to begin instituting even stronger limitations on firms using tax avoidance.

‘Tax avoidance’ has become synonymous with ‘corporate greed’ lately, what with outrage building in the public consciousness about how huge multinationals operating in the UK have been finding ways to pay just a fraction of their tax responsibilities, cheating HM Revenue & Customs out of literally billions of pounds in revenue. However, the Government’s efforts to clamp down on tax avoidance schemes are going to be broadened even further in the immediate future, according to Deloitte, with the firm predicting that Chancellor George Osborne will be dropping the hammer on limited liability partnerships, and doing so will have an effect on not just large firms but small businesses and the contractors they can use to undertake work.

This could be a serious blow for any freelancer or contractor that already has to deal with the IR35 rule, especially since the Government has already been quite keen on strengthening the regulations for sniffing out instances of disguised employment. IR35 is of course designed to ferret out anyone working directly for a company as they would if they were a permanent employee but is instead listed as an independent contractor in order to reduce the amount of tax they pay, as contractors aren’t normally subject to or are only responsible for limited PAYE or National Insurance tax payments; particularly shady firms enjoy cutting corners this way in order to minimise their tax liabilities, but what with the UK economy still in rough shape the Government has decided to try to close as many loopholes as possible.

While I think it’s a fantastic thing to root out corporate corruption on the part of multinationals such as Google, Starbucks, and Amazon in shirking their tax duties – and let’s be honest, these massive companies should truly know better than to engage in such immoral activities, regardless of whether or not there are no laws specifically barring them from doing so – the problem is that the Government is likely casting its net too wide and will only end up throwing out the baby with the bathwater. By having any new anti-tax avoidance rules apply to small-scale firms, freelancers, and contractors, the sheer amount of grief that these new rules will cause these people and companies is going to be overwhelming while at the same time not really benefiting HMRC all that much in bringing in missed income; instead, the Government should seek to reclaim the billions from crafty multinationals that can stand to lose such vast sums of cash.

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