Another query for Mike, this time from Carol, ahead of the Autumn Statement.
Mike says: “I am going to cheat and name two policy issues which continue to have a serious impact on many small enterprises.
“The IR35 intermediaries legislation announced by Gordon Brown in 1999 seemed a reasonable response at the time to the growth of personal service companies specifically designed to reduce income tax and National Insurance. Unfortunately, he failed to take the opportunity to clarify the rules on what does and does not count as an employment. That has been left to the courts to decide which – in a series of confusing and contradictory judgements over the last 20 years – has, frankly, left a total mess.
“When major government departments misunderstand the rules and omit to pay tax of over £100 million, something is clearly wrong. This problem has been highlighted by the case of broadcaster Kaye Adams who, having won her case at two previous court hearings, was told by the Court of Appeal that she would have her case referred back to the tribunal because the earlier judges did not understand the rules and were applying the wrong test. This would be bad enough if HMRC were paying all the costs but the reverse is true. Kaye is already left with costs many times the tax claimed by HMRC, and she has been shown to be in the right! There are thousands of contractors facing the same problems. Small businesses are vital to the economy and deserve clarity on what the rules are and the assurance that they will be applied fairly.
“By the same token, many taxpayers have been treated in a wholly unfair way with the introduction of the loan charge through the application of retrospective legislation. It is a personal view but I regard retrospective legislation as a total anathema and I am frankly appalled that this government has thought it acceptable to act in this way. We have had households torn apart and suicides are now into double figures.
“I appreciate that many readers will say that those caught up in this should have known better and recognised the risks of entering into something that looked too good to be true, but it did not seem that way at the time. I have spoken to some who were told by their employers that to save costs for the company they had to accept this arrangement, approved by their accountants, or face redundancy. They were typically not well versed on financial matters. They received no personal financial benefit from doing so but now face bankruptcy and financial ruin for their blameless families.”