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Sill sole trader tax save the contractor community?

Her Majesty’s Revenue & Customs is convinced that sole trader tax is the answer to the contractor community’s woes – and is pushing hard for its adoption.

HMRC has a brand new scheme, and its goal is to entice small business owners and other self-employed folks such as contractors and freelancers to take part in a programme that could simplify their tax obligations by a sizable margin. The Government’s Cash Basis scheme, as it’s being called, taxes sole traders on their incomes and outgoings and permits anyone who makes less than £79,000 per annum from having to comply with every accounting rule out there – ostensibly to make taxation for the self-employed both cheaper and easier.

All you do for the scheme – and yes of course I’m simplifying a bit for brevity’s sake – is to work out how much cash you actually make throughout the cash year, then subtract anything you spent on any allowable business expenses if any. That’s it, full stop. It’s designed with sole traders in mind – the kind of people that don’t have the time, money, or quite frankly the energy to take care of a full accounting.

It sounds like a positively brilliant idea, and the only thing that’s preventing me from going out and recommending it to everyone I know is that I’m not really sure how it’s going to work in action. True it looks absolutely fantastic on a theoretical level but it remains to be seen if contractors are actually going to benefit from the new scheme by getting their taxes done easier and having to pay less than they would otherwise. I mean it sounds almost too good to be true, and that makes me more than a little suspicious.

Listen, it’s not paranoia if the Government really is out to get you. At the same time I do believe HMRC has the best interests of taxpayers in mind, even if their track record in showcasing their care and attention is less than stellar. Small businesses truly are the backbone of the British economy, so the Government does have a vested interest in making life easier for the self-employed after all, and all signs so far point towards this Cash Basis scheme being something that has the potential to be the saviour of the contracting community. Let’s keep our fingers crossed, shall we?

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