They're not voting because...
- ... because of IR35. It is an unparalleled...
... because of IR35.
It is an unparalleled disgrace that this issue is barely known (do a search on the net to open your eyes) and is certainly not an election issue!
Here's my brief over view to give the search-lazy some idea of how important this is for our country.
New Labour's IR35 legislation declares that recruitment agency workers and other freelancers are providers of 'disguised employees' and taxes them accordingly.
In the 80s, companies downsized their overhead -- but retained employees as freelancers either directly or through agencies -- thus they had bust the Trades Unions, avoided employee legislation on things like pensions, hours, holiday pay, maternity leave, insurance and more. This was worth the redundancy payout.
This happened to coincide with the boom in computers, mobile phones, flat screen TVs and high tech stuff.
Thousands of people became freelancers, working for themselves or through agencies (in a downsized economy jobs are scarce). They bought their council houses, took out BUPA and over a decade, set up their lives and lifestyles...
... then in came New Labour with IR35 -- the "world's biggest stealth tax"... they could roll back the bill for seven years! They have caused untold misery and destitution for those who did not flee abroad.
In aiming to 'catch' the 'tax-dodging' redundancy-takers, they have ruined the freelance economy -- that part of any country's economy that drives skills forward and cuts the edge for the rest.
The result was the biggest ever grass roots movement and the biggest ever internet lobby group against any government -- the PCG (Professional Contractors' Group, http://www.pcg.org.uk/) actually took the UK Government to court several times.
IR35 has turned the UK into a recessive economy -- goodbye "Silicon Glen"!
According to http://www.pcg.org.uk/LatestNews/10143.html
Liberal Democrat candidate Alexander Stone (Morecambe and Lunesdale) wrote,
'I was a Freelance IT contractor for many years until IR35 came along. With the crippling tax burden the Labour Government placed upon my business along with the paperwork I was forced out of contracting and back into permanent employment. I've just recently closed my limited company with Companies House.'
Ertan Hurer of the Conservative Party (Hackney North and Stoke Newington) observed,
'In the "real" world I am a Chartered Accountant and I have seen first hand the damage caused by this Labour Government, in particular the introduction of IR35. Needless to say I support all your aims and objectives.'
Labour's Christine McCafferty (Calder Valley) declined to answer in detail precisely because a close family member works as an IT consultant and she did not want there to be a perceived conflict of interest.
On the specific issues, IR35 found no unequivocal backers at all, though many candidates expressed a preference for reform in order to make it a fair anti-avoidance measure rather than the abolition suggested by PCG.written 6th May 2005
taxexiledvoter replies: Court tax ruling is 'black day for small businesses'
By Richard Tyler (Filed: 28/04/2005) THE GUARDIAN
Two hundred thousand husband and wife firms could owe an extra £9,000 in tax under a High Court ruling yesterday that backed a Government crackdown on previously accepted tax planning.
Experts described the dismissal of the appeal brought by West Sussex IT services firm Arctic Systems, run by Geoff and Diana Jones, as "a black day for small businesses".
Geoff and Diana Jones may appealwritten 14th May 2005
Mr Justice Park said family firms could not reduce their joint tax bill by paying a depressed salary to the main breadwinner and then distributing profits in dividends equally between the spouses.
Mrs Jones, the company secretary who worked four hours a week, acquired her £1 share. But the judge said that even if Mr Jones, the company's chief fee earner, had gifted a half share in the business to his wife, dividends paid to her would still be taxed at his higher tax rate.
Accountants said this qualified the ability of spouses to gift assets to each other for tax planning purposes.
Mike Warburton, senior partner of Grant Thornton, said the ruling undermined the independent taxation of spouses' income, established by former Chancellor Norman Lamont.
He said: "Now effectively, it's only acceptable if you don't take a depressed salary."
The Joneses arranged their affairs so that Mr Jones paid himself a £7,000 salary and his wife received almost £4,000, from the £91,000 turnover. After expenses and corporation tax, the couple shared the remaining £60,000 equally in dividends.
Mr Justice Park said Mr Jones could pay himself a low salary, but that the decision might have tax consequences "and in my judgment in this particular case does".
Accountants have estimated that the ruling will hit around 200,000 family firms, but the judge said these concerns had been "greatly exaggerated". The Inland Revenue estimates that up to 30,000 companies would face higher tax bills.
The judge said: "If a husband and wife set up a joint company and run it together, for example if the company is a shop and the couple run and staff it, it does not follow from my judgment that the husband is going to be taxed on the wife's dividends." He added that it would have been "far harder" for the Revenue to prove its case if Mr Jones had "been paid the going rate for an employee carrying out the sort of work he does".
Accountant Anne Redston, advising the Joneses, said the ruling was a "bureaucratic nightmare" for firms as they would now have to keep records of hours worked so the taxman could see that "market rate" salaries were being paid. "It's a black day for small businesses, especially for the freedom they have had to run their affairs as they see fit," she said.
The Inland Revenue has said it has around 100 other family firms in its sights to take to court. It is expected to accelerate its clampdown and has the power to claim up to six years of unpaid tax.
Mr Jones, who is considering whether to appeal against the ruling, said he was "disappointed". "We have always dealt with our company's affairs as properly as we should," he said. Simon Juden, head of the Professional Contractors Group, which partly financed the case, said: "Couples share risk, the uncertainty and the hard work of family businesses. They should be entitled to share the reward."
Tax feudalism is back
· Court tax ruling is 'black day for small businesses'
Norman Lamont may be forever derided for his role on the ERM fiasco, but one of the many little things he did as Chancellor which he may cite in his defence was finally to bury the outdated notion that a wife is a man's chattel, by introducing 14 years ago the concept of treating married couples as entirely separate individuals when it comes to the tax system.
Yesterday, that feudal notion was effectively revived by Mr Justice Park in a case between the Inland Revenue and a small company called Arctic Systems. The two owners of the company, Mr and Mrs Jones, are just one of hundreds of thousands of entrepreneurial married couples who exercise their legitimate right to restrict the access of the taxman's shovel into their wealth to the legal minimum. In order to take advantage of Mrs Jones's personal tax allowance, they decided she should receive dividends from the company. But Mr Justice Park ruled that the profits available for distribution were swollen by Mr Jones taking an unacceptably small salary, and that this ran contrary to the settlements legislation, designed to stop husbands and wives making commercial arrangements to avoid tax.
To be fair to the judge, that could indeed be what the statute law says. But the relevant settlement legislation dates to a time when we all had domestic servants, wore black and stripes to the office and women had only been able to vote in a handful of elections. In the 21st century, yesterday's judgment - brought thanks to new guidance published by the Inland Revenue - runs counter to common sense.
If it stands, small businesses up and down the country will, theoretically, have to certify to the Inland Revenue that their main shareholders are not living with each other or enjoying sexual relations and that they have not exploited their personal allowances to keep their tax bills down. Any hanky panky, or if they fail the test, their owners could be liable for £9,000 between them. How intrusive, how disruptive and how absurd.
Of course, the situation has only arisen in the first place because of the Government's desperate scramble for revenue and the Chancellor's "anti-avoidance" crackdown. Arrangements like the Joneses' are an inevitable and acceptable consequence of the independent taxation of husband and wife. Their case is being backed by the Professional Contractors Group, so let us hope they take up their right to appeal.