The last few months have been interesting times for freelancers and contractors, mainly caused by an increased public (or media) interest in tax avoidance and evaision schemes. Politically the Government has to judge the public mood and be seen to be doing the right thing.
As a result of this the Government has targeted workers avoiding tax by running their affairs through limited companies and not paying PAYE, and has come up with the idea of senior workers being required to have PAYE deducted at source before their limited company receives any money.
This idea is only currently in the consultation process, which last until 16th August 2012, but it is expected to come into force later in the year.
The rules are expected not to apply to businesses that employ fewer than ten people and would only apply where someone works for a company and controls or directs a major part of its operations or manages a significant proportion of its workforce, the organisation will be required to deduct PAYE tax and NI and pay employers NI on any fees it pays for those services.
The good news is in practice these rules are only expected to apply to a handful of freelancers and contractors and should not be confused with the IR35 legislation which is far more wide reaching.