Umbrella company contractors may be interested to learn that a firm of chartered accountants has expressed concerns about the plan to merge income tax and national insurance.
MacIntyre Hudson LLP said the government’s current proposal lacks clarity. First of all, it’s unclear whether the merger would also apply to employers’ National Insurance contributions. This is a matter of concern because the impact would depend largely on whether both employees and employers are affected by the change.
The accountancy firm has a further range of concerns including the impact the merger would have on overseas workers who pay social security in their home country. MacIntyre Hudson believes foreign nationals could be discouraged from coming to work in this country.
Other concerns involve the complexity of dealing with the salaries of people who earn less than the national insurance threshold as well as the taxation of benefits in kind.
Finally, the proposals would forge a greater divide between the employed and self-employed and workers would not be encouraged to change to employed status.
The OTS believes that merging income tax and National Insurance will cut red tape and the merger could be timed to tie in with real-time reporting.
The government is due to announce its final proposals later on this month. It believes that integrating the two systems would remove economic distortions, reduce bureaucracy and improve fairness.
HMRC has had a lot of problems recently implementing new systems. One could be tempted to think that introducing real-time reporting at the same time as merging National Insurance and income tax is a sure fire recipe for disaster!
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Image: merge by xmatt
