Contractors working through limited companies may again be in the media firing line following a leaked letter to the Chancellor from Treasury Secretary Danny Alexander, in which he expressed “shock” at the “sheer scale” of off-payroll remuneration arrangements in the public sector. Over 2,000 workers may be paid by these means.

This comes in the aftermath of the media convulsion over Ed Lester, the Chair of the Students Loans Company, who provided his services through a limited company. Almost unanimously, this arrangement was portrayed as a nefarious tax dodge, even though no evidence was presented that he had done anything wrong.

Perhaps more disturbing was the government’s response to media ferocity, which showed all the backbone of the average jellyfish. Immediately, it was promising a full investigation into the extent of the “abuse” (even though no “abuse” had been established) and new legislation to tax at source anyone considered to be an integral part of an organisation. So much for all that pre-electoral rhetoric about its disdain for IR35: not only is IR35 still with us but new legislation, too, is on the cards.

No legitimate contractor will have any beef about clamping down on genuine tax cheats, but knee-jerk laws and government by media are hardly the best ways of encouraging the UK’s contractor community to help pull the country out of recession.

PCG MD John Brazier said: “Disguised employment and tax evasion should be investigated and stopped, but genuine freelance contractors should not be penalised in the rush to ‘do something’. Genuine contractors contribute greatly to the economy, providing value for money to the taxpayer, and essential skills and services to the public sector.”

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