PRESS RELEASE
March 2007
Sir - You reported in The Daily Telegraph (March 20) that the Treasury was urgently trying to tighten the new regulations on managed service companies, prior to the Budget. [In your] comment column, [you] then described these companies as a "convenient shelter for an estimated 240,000 - 250,000 contract staff, mainly in the IT industry, to offset tax on earnings and frustrate the taxman's attempt to bring them into the net."
It is sad to see [you] sustaining the Treasury's view that, unless you wear an overall and have a box of spanners, you must be in conventional employment.
We have tried on many occasions to persuade Treasury officials that the vast majority of professional IT contractors make a lifestyle choice to provide services to end-users, rather than pick up a monthly pay cheque. They are not employees, but self-employed contractors, and they expect to be called in by organisations only when their expertise is needed for specific, short-term reasons.
They do not want or expect the protection offered by full-time employment. Government officials find it hard to accept that contractors enjoy the different challenges and the exposure to the variety of clients they work for. Instead, they are fixated with the notion that people mainly become contractors in order to pay less tax than those in permanent employment.
However, despite the fact that the Government has made it clear that it is deeply suspicious of anyone who operates outside PAYE, the fact remains that contracting is here to stay and is certainly going to grow in the next decade.
Our business is owned and run by qualified chartered accountants and we are regulated by the Institute of Chartered Accountants in England & Wales. Despite offering managed services as one of our range of accounting solutions in the past, the proposed legislation will prevent us from doing so in future.
Whether this is in the best interest of our clients, or indeed the Treasury, remains to be seen.
In the meantime, the Government must enshrine in law, once and for all, the difference between contract service providers and employees, in order to bring to an end the current raft of confusing, misleading and unfair taxation legislation.
Barry Roback, chief executive, The JSA Group of Companies