Contractors working through limited companies or umbrella companies may be pleased to hear that the Government is adopting a more novel approach to the issue of tax avoidance.

A paper entitled “Tackling Tax Avoidance” has just been released by HM Treasury and has quickly won approval from a prestigious tax organisation, The Chartered Institute of Taxation (CIOT). CIOT has been campaigning for some time to persuade the coalition to change its stance on retrospective tax changes, which it believes would cause widespread uncertainly and confusion. The proposals contained in the new paper have been hailed as a victory for the organisation, as the retrospective approach to tax has at last been dropped.

Commenting on the development, the CIOT’s President, Vincent Oratore, said that government’s adoption of a new strategic approach will be welcomed by many small businesses and contractors throughout the UK, and will provide “a route towards greater certainty in the tax system.” He praised the decision by government to set out the principles by which it would decide when to announce unscheduled tax changes, which he described as “a good step forward.”

Expressing his pleasure that the Government had listened to his organisation’s concerns about retrospective taxation, he added that the measure would have led to “an impression of an unpredictable tax system.”

There were less favourable comments for the government, however, issuing from the respected think tank, the Adam Smith Institute. Responding to the recent budget, the organisation dismissed many of the measures aimed at encouraging growth as “timid modifications.” The Institute maintains that they fail risibly to tackle the single most important obstacle to economic growth in the UK – excessively high levels of taxation.

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