PCG responds to pre-budget report

The Professional Contractors Group (PCG) has welcomed the Chancellorís plans to extend flexible VAT payment options to more small businesses, as announced in his pre-budget report today. It also approves of the simplification of corporation tax calculations, with the simultaneous scrapping of the zero per cent rate and the non-corporate distribution rate, which effectively cancelled one another out.

ìWe also agree with the Chancellorís assertion that the UK can be a world leader by ëcombining our enterprise with investment in skillsí,î said PCG chairman, Simon Juden. ìWe are disappointed, however, that he continues to ignore the one in seven workers in the UK who choose to work for themselves. The UKís freelance consultants and contractors offer the economy a highly skilled and flexible resource and have an important role to play in fulfilling Mr Brownís vision of equipping Britain for the global economy, and yet his statement today offered them little.

ìWe welcome his initiatives to make training more accessible for small businesses,î said Dr Juden, ìbut they are unfortunately undermined by his previous measures. Contractors deemed to operate within the IR35 intermediariesí legislation have to fund their training from post-tax revenue, unlike the larger consultancies with which they compete. Likewise, we are pleased to hear about the savings made following the Gershon report, but we would like to see public sector procurement being opened further to smaller, independent consultants to offer enhanced competition and efficiency.î

PCG recently wrote to the Paymaster General asking whether the Government was planning to review the criteria for launching IR35 investigations. ìThis was prompted by our analysis which showed that of 1,164 investigations handled by our approved suppliers, only three had resulted in the contractor being found to be within the IR35 rules,î said Dr Juden. ìApart from the terrible toll that these investigations take on the contractors, their families and their business relationships, we are concerned about the cost to taxpayers of funding so many lengthy and fruitless investigations. We had hoped that the Chancellor would take the opportunity to announce a long-overdue review of whether IR35 has served any useful purpose.

ìWe support sensible approaches to anti-avoidance, as proposed earlier this year by Austin Mitchell MP,î said Dr Juden, ìand we believe that the Treasury and HMRC would find this approach far more rewarding than targeting small IT and engineering consultancies operating their businesses lawfully. The risk-based approach to regulation mentioned today is laudable, but we want to see mechanisms for assessing post-implementation impact, particularly with regard to tax measures.î