With recruitment seemingly under HMRC’s microscope and various reporting and legislative changes looming, it seems that micro business or limited companies with one director are regarded as just convenient vehicles to avoid tax and NIC. The government should remember it was them that stopped self-employed contractors from operating as self-employed in their own right way back, insisting on them forming limited companies. It seems the take up was slightly higher than expected with the FT recently reporting that some 4m companies that have incorporated don’t have any employees. That would suggest that while HMRC has put a figure of £400m as lost revenue on the reasoning behind the legislation I feel this is somewhat underestimated, as this would only represent £400 per company being lost to the treasury.

Giving the introduction of a 7.5% tax charge on dividends, being the usual method directors extract money from the companies, I feel this could generate around £2.5billion in new tax revenue per year from next April.  

Why therefore would government put effort and energy into introducing more legislation – with the subsequent extra red tape – affecting recruitment companies and ultimately the end hirer of the workers to generate £400m, when in fact they have over six times this amount on the way every year?

Rather than discouraging these workers, maybe our dear friend Mr Osborne should be encouraging more of them. These workers boost company output, are an asset to the UK economy and contribute significantly to the UK overall tax take.

What about the workers abusing these vehicles and not paying tax at all? Well with agency reporting now mandatory every quarter, HMRC will have the intelligence to maximise wins from tax enquiries in the future so I am not sure why government is debating further legislation when already it seems they will be exceeding their desired outcomes with existing policy already in place.

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