Tax doesn’t have to be taxing, but it suits too many people to keep it that way

25 Jul 2017

While the government has kicked the “Making Tax Digital” can of worms a further year down the road, memories of the Class 4 debacle appear to be fading. What the government response will be from the Taylor Report into the gig economy is discussed in the Daily Mail, where Mike Cherry, chair of the FSB, says Matthew Taylor’s recommendations “strike a balance between fairness and a flexible labour marketr” but he said the government must “protect the genuinely self-employed from being dragged into a new category of dependent contractors”. Mr Cherry said “the tax system must continue to recognise the risk and insecurity faced daily by the genuinely self-employed – this is right in principle, [but ministers] must make no attempt to single them out for tax hikes.”

There are too many MPs that still don’t understand small business or self- employment very well, and too many of these feather-bedded public sector employees end up in the Treasury. For example, Labour MP Margaret Hodge has been quoted as saying “For the BBC not to have dealt with the issue of personal service companies - which are only a vehicle to avoid tax - is just inexcusable”. “Personal Service Companies” is a term invented by HMRC to describe a legal entity invented by Parliament. Not to be outdone, Tory MP Philip Davies added: “It is totally and utterly unacceptable for the BBC to be colluding with presenters to help them avoid paying tax. If they are full time employees, they should not be paid through companies. This loophole must be closed and the BBC should reveal the names of the people being paid in this way.” He has a point if it is that simple, but it probably isn’t. The one-man company probably doesn’t save tax, it may save National Insurance, but the MPs can put that right by abolishing NI and increasing rates of tax. Also, is that attempting to influence the BBC to breach the Data Protection Act?

It is in the nature of past governments to misunderstand the problem and fix what isn’t broken, with often unintended consequences.