Freelancer limited company tax structure called for

Thursday 30 October 2014

An optional 'freelancer limited company' structure is being called for to be implemented into the UK's tax system.

The suggestion was put forward by the Association of Independent Professionals and the Self Employed (IPSE), following a call from the government to put forward suggestions for the Chancellor's Autumn Statement.

HM Treasury said that it would consider ideas from people, representative bodies or companies for inclusion into the Autumn Statement, which is due on December 3rd, if they were deemed original and innovative. The deadline for suggestions was October 17th and now IPSE has outlined the ones that it put forward.

IPSE suggested a list of policy proposals that it says are designed to offer better support for independent professionals in the UK, including sole traders and umbrella company contractors. These are in line with the ideas that it put forward in its manifesto, titled Britain's Secret Economic Weapon.

The reason why it suggested a 'freelancer limited company' tax structure is that IPSE believes this would deliver clarity of employment status for independent professionals. It says that this should be implemented in the next government's first Finance Bill and that it should be a specific, opt-in structure that is only open to independent professionals rather than large companies. In turn, this would exempt them from IR35 status and treat such professionls as a business.

This approach would also mean that self employed people would face a less burdensome structure, although they may still want to go through it with their contractor accountant.

IPSE argues that there is already space for this, following the introduction of the 'simpler income tax for the smallest businesses' scheme that charges tax on a cash accounting basis.

As well as implementing the 'freelancer limited company' tax structure, IPSE also suggested putting together an expert body that could examine how a merger of income tax with national insurance contributions could be delivered. The tax structure suggested is intended to precede this merger.

IPSE also said that training for new skills should be deductible from taxes so that the smallest businesses and sole traders can be helped to build 'portfolio careers'.

Additionally, it called for a cut in business rates for workhubs. Indeed, this is an area that small firms have long complained about as a barrier to growth as they feel that business rates are often too expensive. Lastly, IPSE asks for the introduction of a pension scheme that allows the self-employed to withdraw the last two years of a contribution without facing a penalty.

Head of policy and external affairs for IPSE Simon McVicker said: "Ahead of the General Election next May, the Autumn Statement presents the perfect opportunity for George Osborne to show how serious the Conservative Government is about supporting Britain’s 4.6 million self-employed people.

“The policy proposals we are recommending will deliver a simpler tax system, a flexible pension scheme, a fairer approach to training and most importantly, a level playing field for independent professionals.”

By Victoria McDonnell

Get in touch

Please select your type of enquiry:

Brookson on Twitter