So Gordon Brown has finally bitten the bullet and decided to try and get his hands on lots of lovely lolly from those nasty tax avoiding people in the construction sector. Yes, so-called composite companies are the latest to be targeted in a Treasury crackdown (page 7).
Gordon is wise to get this one out of the way long before the next general election, as it is hardly likely to be a vote winner. An estimated quarter of a million workers, from electrical contractors through to teachers and nurses, use the composite company loophole to reduce their tax burdens.
This nifty bit of footwork sees workers employed by managed service companies as shareholders, paying tax only on the minimum wage and walking away with dividends that are exempt from tax and national insurance.
You can see why Gordon is prepared to annoy voters, many of whom, particularly teachers and nurses, are more than likely to be Labour supporters. The Treasury estimates that stopping this perceived abuse of the tax system could net the government coffers some £350 million in 2007.
Of course, there are other good reasons why composite companies should be consigned to the scrapheap. Apprenticeship training is one area that has suffered since the rise of these companies and they do little to stabilise the industrial relations framework of the industry due to the lack of a level playing field for wage rates.
The Treasury’s consultative paper is currently working its way through the legislative process and new rules could take effect as early as April. The game could be up for the tax dodgers.
Source
Electrical and Mechanical Contractor
