Feeds

IT contractors cry foul over HMRC income splitting law

'Stop crippling us, we're not tax dodgers'

Providing a secure and efficient Helpdesk

IT contractors are up in arms about government legalisation that will overhaul income splitting arrangements among individuals following a landmark case that Her Majesty's Revenue and Customs (HMRC) lost.

In July last year, Arctic Systems beat the taxman which had pursued the small, family-run IT services firm for what it claimed was unpaid taxes.

However, the long-running legal dispute came to an end when the House of Lords threw out an appeal from HMRC in favour of Arctic bosses and married couple Geoff and Diana Jones.

At the time the HMRC responded by accepting that it had lost the battle, but reckoned it would win the war by introducing a new law that would close what it considered a loophole in the system.

HM Treasury said it wants to prevent individuals from divvying up income earned from businesses with other individuals solely to reduce their joint tax bills. It has also estimated that some 85,000 companies throughout the UK were currently working the system to their advantage.

The government plans to introduce legislation from 6 April this year. HMRC laid out draft consultation guidelines (pdf) last month in which it said:

"The intended outcome of the proposed legislation is to undo the tax advantage gained by income shifting arrangements. The legislation does not consider any situations where an arrangement has been made on a commercial or arm's length basis."

HMRC proposes four conditions that would need to be set to determine whether income splitting is taking place:

• individual one is party to, or has power over the relevant arrangements;
• individual one forgoes income and the foregone income is individual two's for the relevant tax year;
• individual one has the power to control the amount that is shifted; and
• the shifted income consists of distributions of a company or profits of a partnership.

But many have voiced concern about the government's stance, arguing that the new law could affect small businesses throughout the UK.

The Professional Contractors Group, which supported the Joneses throughout their fight against the taxman, has set up an e-petition in the hope of convincing the government to "abandon" its plans on income splitting.

Elsewhere, a lone IT contractor has decided to take on the HMRC by setting up a Facebook group, dubbed "Stop the government from crippling contractors!", in the hope of provoking a stampede of Web 2.0 opposition to the legislation.

So far the e-petition has garnered more than 2,500 names, while the Facebook group has just 15 members who agree that the government's plans will hurt IT contractors' pockets. ®

Secure remote control for conventional and virtual desktops

More from The Register

next story
Facebook, Apple: LADIES! Why not FREEZE your EGGS? It's on the company!
No biological clockwatching when you work in Silicon Valley
'Cowardly, venomous trolls' threatened with TWO-YEAR sentences for menacing posts
UK government: 'Taking a stand against a baying cyber-mob'
Doctor Who's Flatline: Cool monsters, yes, but utterly limp subplots
We know what the Doctor does, stop going on about it already
Happiness economics is bollocks. Oh, UK.gov just adopted it? Er ...
Opportunity doesn't knock; it costs us instead
Arab States make play for greater government control of the internet
Nerds told to get lost in last-minute power grab bid at UN meeting
Zippy one-liners, broken promises: Doctor Who on the Orient Express
Series finally hits stride, but Clara's U-turn is baffling
Don't bother telling people if you lose their data, say Euro bods
You read that right – with the proviso that it's encrypted
Apple SILENCES Bose, YANKS headphones from stores
The, er, Beats go on after noise-cancelling spat
prev story

Whitepapers

Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Why cloud backup?
Combining the latest advancements in disk-based backup with secure, integrated, cloud technologies offer organizations fast and assured recovery of their critical enterprise data.
Win a year’s supply of chocolate
There is no techie angle to this competition so we're not going to pretend there is, but everyone loves chocolate so who cares.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Intelligent flash storage arrays
Tegile Intelligent Storage Arrays with IntelliFlash helps IT boost storage utilization and effciency while delivering unmatched storage savings and performance.