Poor Andrew Gilligan. He just can’t get his head round the tax system, no matter how hard he tries. Yesterday, the Telegraph’s most notorious purveyor of dodgy journalism allowed his obsession with London Labour Mayoral challenger Ken Livingstone to cloud his already suspect judgment once again, as he latched on to an item in the Budget document on the subject of service companies.
Gilligan has picked out an item on Page 77 of the PDF document (characteristically, he gets the page number wrong in his blog post) and quoted selectively from it. His analysis misses out the key element: that this is to do with tightening up the hated IR35, one of those tax measures that the Tories liked to kick Pa Broon for introducing, then embraced enthusiastically once in power.
This is the paragraph concerned:
2.207 Personal service companies and IR35 – The Government will introduce a package of measures to tackle avoidance through the use of personal service companies and to make the IR35 legislation easier to understand for those who are genuinely in business. This will include:
(i) strengthening up specialist compliance teams to tackle avoidance of employment income;
(ii) simplifying the way IR35 is administered; and
(iii) subject to consultation, requiring ofﬁce holders/controlling persons who are integral to the running of an organisation to have PAYE and NICs deducted at source by the organisation by which they are engaged. (Finance Bill 2013)
IR35 is the measure that stopped contractors working through limited companies from taking part of their income as dividends and thus avoiding some National Insurance payments, if they were in full time contracts. It does not affect those with no full time job whose companies rely on multiple income streams – like Ken Livingstone and Silveta.
Many full time contract workers wound up their limited companies when IR35 came in, and with most new entrants to this market, used service companies instead. Many of these, in turn, work to maximise returns for those workers while staying on the right side of IR35. The Budget move is trying to ensure that Income Tax and National Insurance contributions get deducted, and therefore collected, more reliably.
So this supposed Ken catcher is nothing of the sort. And Richard Murphy, who Gilligan quotes in his post, has said as much on his blog: this will hit “anyone with most of their consulting income from one client”. Gilligan, you’re a disgrace. Again.