MPs call for change to contractor taxes

Thursday 17 March 2016

Tax can be very complicated when you are a contractor. Sometimes it can seem like this important group of workers are not recognised to the same extent that people who are employed or fully self-employed are, and as a result the taxation laws are hard to understand and potentially unfair.

Of course, companies like Brookson can provide the financial expertise needed to navigate a contractor's tax return. However, a cross-party alliance, made up of 55 MPs, wants to go one step further and change the law, making taxation simpler and fairer for contractors across the UK.

With the help of employment intermediary trade body PRISM, the group has penned and published an open letter to chancellor of the exchequer George Osborne recommending the law be reviewed and simplified. In part, this is due to a pair of major changes to this area of taxation, one from the Finance Act 2015 and another proposed in the Finance Bill 2016, which affect contractors.

The letter states that the government has taken a "sticking-plaster approach that has created layers of confusing rules", which has left contractors with "no clarity over their tax affairs". This is despite how important these temporary workers are to the British economy.

So, what does the PRISM-backed group suggest as a solution? First of all, it wants the government to conduct a strategic review of contracting employment, simplifying the taxation system and ensuring that "labels given to workers are reflected in the real economy".

This is due to a major issue with the current system: despite the fact that 1.6 million British people are counted as contractors, HMRC only recognises two categories of worker. Either you are employed, or lumped in with the 4.6 million self-employed workers in the UK. However, contractors tend not to fully fit in with either category.

One of the signatories is Helen Goodman, a Labour MP and member of the Treasury Select Committee. She said: "I support this call for a review of the tax system for self-employed people and contractors, because our current system fails to adequately recognise and support this important section of the work force.

"In our increasingly complex and flexible labour market, more and more people work in a way that is neither traditionally ‘employed’ nor ‘self-employed’, yet our tax system tries to shoehorn them into one or the other category. This denies them the security and advantages they may be entitled to for the convenience of the government."

Other signatories include Conservative MP and member of the Justice Committee Philip Davies, SNP whip Owen Thompson, and Rt. Hon Tom Brake, the Liberal Democrat chief whip and shadow LD leader of the House of Commons.

By Victoria McDonnell

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