Employment taxes contribute over 40 percent of HMRC receipts. The government recognises that many individuals choose to work through their own limited company. Article by Head of National Employers Advisory services at accountancy firm Crowe Clark Whitehill, Susan Ball.

Anti-avoidance legislation commonly known as IR35, introduced in 2000, requires that they pay broadly the same tax and National Insurance as other employees (where but for the Ltd Co they would have been an employee) is not effective enough. Non-compliance in this area is estimated to cost over £400 million a year. The government has therefore asked HMRC to look into how to improve the effectiveness of existing IR35 legislation. Recent comments by David Morris, the self-employment tsar, had led to speculation on further changes to IR35. Currently we are none the wiser, other than being told that a discussion document will be published in due course. Personal Service Companies want clarity. The last attempt in the business entity tests failed and they were withdrawn from April 2015. Let’s hope this attempt produces better results as we are likely to see increased activity by HMRC.”

Employment Allowance increases will stimulate employment

Susan Ball continues: “To ensure that the NICs Employment Allowance is focused on businesses and charities that support employment, from April 2016, companies where the director is the sole employee will no longer be able to claim the Employment Allowance. From April 2016, the government will increase the National Insurance contributions (NICs) Employment Allowance from £2,000 to £3,000 a year.Increasing the National Insurance contributions allowance will stimulate employment and provide much needed help to both businesses and charities. Using the savings to train and develop staff could provide even greater rewards.”