Tory MP recommends NIC name change
Ahead of next week’s Budget, Conservative MP for Ipswich, Ben Gummer has proposed to the Chancellor that he change the name of NIC to “Earnings Tax”. Furthermore, it is something that Gideon (George Osborne) finds appealing.
If the Chancellor is to run with this idea it could herald the beginning of the integration of NIC and income tax, as recommended by the Office of Tax Simplification in 2010 but spoken of in the corridors of Whitehall for decades beforehand. Allister Heath, editor of City AM, is also an advocate of this concept but wants Mr Osborne to send out a clear signal of commitment to this process by providing a timetable detailing how the two taxes would be united.
In a recent article written for the Daily Telegraph, Mr Heath set out a number of other policies he would like to see the Chancellor implement on 19th March:
- A pledge that nobody should have to pay more than 50% of their income in any given tax year, extended to income tax, NIC, council tax and stamp duty.
- Increase in the personal allowance coupled with a hike in the 40% tax threshold. This should not be an ‘either’ ‘or’ choice.
- Capital gains tax to be indexed for inflation and Entrepreneurs Relief extended to employees who are awarded shares or options in businesses with existing incentive schemes.
- Bring forward by one year the reduction in the main rate of corporation tax to 20% so that it applies from April 2014.
The PCG have a different agenda and want Mr Osborne to ensure that contractors are specifically excluded from the proposed revision to the agency legislation designed to tackle false self-employment. They have also urged Gideon to delay implementing the proposals to give businesses time to come to terms with the “very serious potential economic impacts of these changes.” This despite HMRC’s recent guidance indicating that PSC’s only have IR35 to worry about.
What we can probably expect next week is a Budget short of radical tax cuts with the country’s deficit remaining high and the Tory’s coalition partners putting the brakes on in certain areas.
I am a contractor and actually like this because if a tax becomes cheaper to collect, the goverment can in theory, pass on the savings and/or need to make fewer cuts elsewhere.
The solution for PSCs would be a simple method to reclaim/withold a portion so as to reflect our status, and this could simply be another box on the self-assesment form.
The other plus-point is that it makes rates more transparent, and thus harder for Hector to sneak in tax hikes.