A delay to the false self-employment proposals, an extension to broadband funding and a renaming of National Insurance are among the measures George Osborne is being urged to unveil at his Budget in nine days’ time.
The chancellor has also been called to implement anti-late payment rules to help freelancers get paid on time, and tackle offshore tax evaders, but it is the rebranding of NI that has attracted the most attention, even Mr Osborne’s.
In fact, when he heard of the proposal by Tory MP Ben Gummer to change the name of National Insurance Contributions to “Earnings Tax,” a Treasury source told the Daily Telegraph that the chancellor was “attracted to the idea.”
Another national newspaper, The Independent, quoted Mr Gummer as being “pleased” to hear that Mr Osborne is interested in the proposal which, if accepted, would be the first step to the long-threatened merger of NI with income tax.
Recommended in 2010 by the Office of Tax Simplification as a way to “take away the need for IR35,” the Institute of Directors has previously told FreelanceUK that freelance “contractors would not be made worse off” from the merger.
Reflecting last week on the news that the alignment is back on the cards, the IoD endorsed: “Ultimately, income tax and national insurance both affect individuals in the same way as deductions from their gross pay with no direct benefit to that individual.”
Even without the merger, the renaming of NI would put an end to taxpayers “being grossly misled,” because it is not, as many people think, set aside for their pensions but is actually used by the state for day-to-day spending, says IoD’s Stephen Herring.
Mr Herring is one of the many tax experts who gave evidence to an “inquiry” into the tax consequences of limited companies, held by the Personal Service Companies Committee, whose recommendations may be published alongside the Budget.
Another expert witness who gave evidence to the committee is PCG, which is concerned that limited companies may be hit by the contentious proposals to tax ‘false self-employment,’ if legislation is rushed or bodged.
PCG chair Julie Stewart warned Mr Osborne in a letter: “There has been marked uncertainty regarding the reach of the legislation and despite assurances by HMRC, if the legislation is poorly drafted this will produce unnecessary burdens for the UK’s freelance workforce.
“There is a clear need for freelance business to be explicitly excluded from the government’s plans. Serious consideration should also be given to delaying the implementation of the proposals. This will give businesses the time they need to get to grips with the very serious potential economic impacts of these changes.”
The freelancers’ trade group also told the chancellor to extend funding for rural broadband; enact new rules against late payment (especially in the public sector), and remove or reduce business rates for collaborative working spaces.
However any new tax cuts unveiled on March 19 will be focussed on people on “low and middle incomes,” Mr Osborne said in an interview with Sky News in January, hinting he will continue the policy of uplifting the starting threshold for income tax.
Such a move risks disappointing the City and Middle England, as both say any change to thresholds should be made to the 40p tax rate, which in 2013-14 was cut by the chancellor to catch anyone earning £41,450.
But if Mr Osborne wants to show he’s in touch with the public, then he might use Budget 2014 to tackle multinationals in the UK who are avoiding their ‘fair share’ of tax, a survey by Baker Tilly suggests.
Corporations paying the ‘right amount’ of tax to the Exchequer is what the biggest chunk (more than a third) of the public wants Mr Osborne to address, ahead of reducing employers’ NI, and tackling offshore evaders – backed by more than a fifth of those surveyed by the accountancy firm.
In addition, a reduction in VAT, albeit just for restaurants and tourist attractions, would please 15% of the public, more than twice the number of people who want to see the 50p rate of income tax reinstated for top earners.
Baker Tilly tax partner George Bull reflected on the findings: “In the past we’ve had ‘A Budget for Jobs’ and ‘A Budget for Recovery,’[but] clearly this year the government is keen to do what it can to genuinely engage with people, so 2014 could well be the year of ‘The DIY Budget.'”
He added: “We know that the OECD is currently working on a solution to address this issue [multinationals’ tax arrangements], but this will take some time and it’ll be interesting to see whether the chancellor might be tempted use the Budget to introduce a ‘quick fix’ solution ahead of the election.”