Schedule 3
Finance Bill
12:00 pm
Theresa Villiers (Shadow Chief Secretary To the Treasury, Treasury; Chipping Barnet, Conservative)
I apologise, Mr. Illsley. That was an error on my part; I must have got the number of the amendment wrong.
In conclusion on this group of amendments, the Committee has listened patiently, which I appreciate, to my lengthy submission on the potential problems caused by schedule 3 and the best way, in our view, to deal with those potential problems. I have spoken at length about the position of the professional advisers. I have done so partly out of concern for the position of those professionals, but my main reason for doing so concerns their clients—hard-working, hard-pressed freelance workers, who are just trying to make an honest living. It is their relationship with their professional advisers that the Government have chosen to focus on in determining how much tax those people will pay and whether their company is treated as a MSC. That is why I have dwelt on the relationship with advisers.
I emphasise that being a freelance worker does not make someone a tax dodger. Yes, the tax system for freelancers is different to that for employees, but one must factor in the fact that those workers get no sickness pay, no holiday pay and no employer-funded pension schemes. With IR35, the Government have hit those people with hassle and huge compliance costs. The hon. Member for Wirral, West may not be worried about IR35, but thousands of contractors are. The Opposition are proud of the stance that we took on IR35. If the hon. Gentleman has not had many e-mails so far, I suspect that he might get a few more in the future. Now the Government, to add insult to injury, are not only imposing the hassle of IR35, but they want to prevent contractors from getting professional help with navigating the bureaucracy caused by IR35 and other regulations produced by the Government.
I close by reading an e-mail that I received from an IT contractor, Steve Birchall, which sets out just how disruptive schedule 3 is proving to be even before it is on the statute book. He said:
“I used to use a MSC simply because they made sure that all required tax, VAT and legal requirements were met. In particular they ensured that I had a clear and full understanding of how much of the money my company had in its accounts was mine and how much needed to be paid to the various government bodies, VAT, NI, Income tax. Corporation tax etc. etc.
I DID NOT use this as a vehicle to avoid tax.
If I wanted to do this a normal Ltd company option provided more tax savings due to the ability to reclaim more VAT and claim certain additional expenses. I simply wanted someone to look after the finances of the company so that I did not personally spend any money that should have been put aside for taxes etc. I just wanted a clear indication of what was MY money to spend and what had to be paid over or put aside.
Due to the recent changes relating to MSCs, I have now been robbed of that option. I have tried to find a company that would help with the financial running of the business, but in every case they have stated that they cannot now do this, for fear of being seen as having some control of my company and in so doing, incur risks and penalties.
So I now find myself being responsible for running a company (that I don't want to run) and having full responsibility for the tax, NI, VAT etc, bills, with no help from anyone. I have the use of my accountant, but they can only do so much to help because they fear that they might be held responsible for any tax claims from HMRC should that situation arise.
It does seem crazy to me that I now cannot use a professional body to help me control my finances, this would seem to be a responsible thing for me to do and yet I risk financial penalty just for trying to act responsibly.”
On behalf of Mr. Birchall and the thousandslike him, I urge the Minister to think again about schedule 3 and accept the Opposition’s amendments.