They’re the rules so people work to them. If dividend tax was aligned to income tax rates would go up and clients would no longer see the savings from using contractors. Ir35 addresses a bit of that around employers NI but has many bad side effects.
The problem is clients using contractors as bums on seats in place of permies. When you have subbies with longer careers at a client than permy staff, that’s the client’s fault. The subbies are just lucky in that situation.
In the end though, most contractors use that increased income to spend more. So much of the ‘avoided ‘ tax goes back into the economy. They’re not generally stashing it offshore and claiming non-dom status. You only need to hit a couple of Philip Greens a year to more than make up for all us tax dodging subbies.
I fail to see why the tax system should be any different for one person companies fulfilling the roles you described. The argument that you spend the money anyway it’s a tad hollow, could equally argue that all employees should be taxed in that fashion. I assume the only reason the system lasted so long was because it suited businesses and they managed to successfully lobby a succession of Chancellors. I also assume that the changes have resulted in a greater tax take for the Exchequer?
It’s a complete fucking mess. And every time hmrc try and find some more they tend to just create more loopholes.
Where they’ve been pragmatic - flat rate VAT for example - I’d guess they retain a much higher percentage of what they can because it’s easier to administer and police
My main beef is they expend a huge effort trying to get £3.50 out of thousands of us when they could get £3.5M each out of a few individuals for less effort
Pfft not while theres a proportion of about 900,000 single handed limited companies paying less tax than PAYE equivlents to be squeezed for the benefit and reassurance of those that are PAYE
