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The government’s plan to overhaul the tax system by lowering the threshold at which employees are considered to be working for themselves is being hailed by business leaders as a new “startup day”.
The government said on Thursday it was “very pleased with first phase” of proposed changes to the tax system that would bring an end to what it says is unfair “head tax” for independent contractors, who currently do not pay income tax on working at their own premises.
The move could see hundreds of thousands of small businesses – the majority of the 1 million-plus self-employed people in the country – move into a new “shared self-employed employer” relationship. The system, which is being described as the end of “head tax” and similar arrangements like it in the UK, is seen as the way businesses will be able to pay higher income tax.
“The government believes that self-employed workers – and the self-employed workers in particular – already benefit from the fairness of tax reliefs, and have been through a lengthy process of reform with the help of the courts to achieve this outcome,” a Treasury spokesman said.
But some of the small businesses themselves criticised the move saying it will make it harder for them to do business and make it harder to recruit workers to help their businesses expand.
Maggie Smith, chief executive of the Small Business Chamber of Commerce in Northern Ireland, which has been opposing the new arrangements said that “most business owners are not going to be too concerned with whether someone is working for them”.
She added: “Our businesses are thriving when they are self-employed without head tax. There is a very small number of businesses, usually those in the creative industries such as film and TV, which are already subject to significant head Tax for workers and we would welcome an end to them as soon as possible.”
Some business owners said that it was too early to see how small enterprises will cope with the changes but some said they were already seeing the benefit.
Dennis Pritchard, owner of a London travel agency called Traveller Travel Advice who had been raising money on the crowdfunding site Kickstarter in a bid to raise £500,000 for a London travel company, said that he was not aware of anyone being charged on the way into and out of the company’s office. He said that he would not be surprised
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