08000 234484 or 01923 729517
Contractors Tax Planning

Contractors beware! HMRC is starting to play nasty!

I don’t often rant about things that I can’t change! In fact, my approach to business has always been to take the time to understand the situation presented to me, look at all of the options for dealing with it, and then execute a solution. Whether it has been attracting new customers, building a fantastic team, setting up efficient businesses processes, creating a service which delivers value and keeps customers, or any other business function… my policy has always been the same. Discover what ‘best practice’ looks like and then be the best that I can possibly be at making it happen. That way, the only thing that I am not in total control of is the starting scenario. I figure that if we are all playing by the same rules, the answer is to understand them, then simply play a better game.

That’s why Meades Contractors has always been so successful at helping contractors find their way through the maze of tax legislation without getting stung!

But what if the goal posts keep moving and the rules keep changing?

You see, HMRC is not just bending the rules of fair play in business, they are finally crossing the line. It seems to me that, while the news is still full of ‘global giants getting away with it’ stories, this autocratic government department is bullying the little guy more than ever. It is demonstrating power hungry, intimidating and one might even say oppressive behaviour that, to be totally honest, is a little bit frightening.

Recent legislative changes are starting to sound like the setting of a dystopian novel:

  • The APN (Accelerated Payments Notice) regime means that HMRC can now take your money without first having ‘proved’ they have a legal right to it or that you’ve even done something wrong.
  • HMRC are now able to take money directly from both company and personal bank accounts without prior permission.
  • For contractors, in particular, HMRC can access sensitive, personal earnings information from an agency using your RTI and NI number to learn real-time information about you. This is a major security issue and can often lead to an IR35 enquiry.
  • HMRC is using all of this information, along with its spies in other pies, inputting it all into its big computer and creating a ‘bare all’ financial database of everyone.

Please don’t get me wrong. I am in no way advocating that anyone should be able to dodge tax by going under the radar. My point is that all of this ammunition, this big laser-sighted sniper weapon, is being aimed at the sea of contractors and small business owners who are working hard to make a positive impact on the economy.

It just feels like bullying to me.

A futile effort to disguise their cruel intention

Someone once said, “When the government fears the people, there is liberty. When the people fear the government, there is tyranny.” And it worries me that this ‘big brother’ trend is getting worse. Instead of the annual tax return, it seems that we will shortly be doing accounts every three months. I have no doubt that this will also mean payment of tax will be required in the same time frame and place another burden on the ordinary taxpayer. This is not only an extra weight in terms of cash flow but also, the additional paperwork required is going to be a huge burden.

This, like the recent announcement about using personal tax accounts, has been pitched as being a favourable change for taxpayers but appears to me just further evidence of monitoring our financial circumstances in real time.

And even more red tape to run through…

Did you know that there is a government department called The Office of Tax Simplification? Now, I am not sure if the people working there were behind these changes, but if they were they are not fulfilling their job description with these added complications to an already mind-blowingly complex system:

  • The new tax dividends of 7.5% due to start in April 2016
  • The new stamp duty additional rate of 3% on ‘buy to let’ property
  • HMRC reclaiming child benefits on households with certain income levels
  • The abatement of the personal allowance meaning an actual tax rate of 60% on income (giving us rates of 10%, 20%, 40%, 60% and 45%)
  • Restricting tax relief on mortgage interest on ‘buy to let’ property for higher rate tax payers (and being phased in over 4 years)
  • The simple idea of ‘wear and tear’ allowance on furnished rental property being abolished
  • And finally, the whole ‘Autoenrolment’ system for all non directoronly companies (I imagine that this will be extended to all companies once they have the computer power to handle the numbers!)

There’s the wound, now the salt: “Tax doesn’t have to be taxing” has been the slogan for HMRC since 2002! What a joke!

That is my rant over. I am now going to go and find the best way to walk my customers through the big bully’s playground and find them a safer place to work, rest and play.