Budget 2011 – Income tax, NIC’s and IR35
The Budget included a commitment to merge income tax and national insurance contributions, following a proposal from the Office of Tax Simplification, which was tasked with both simplifying the tax system and finding a solution to problems posed by IR35. Merging income tax and national insurance contributions is intended to remove distractions, reduce burdens on businesses and improve fairness. The Budget does suggest that dividend payments would be excluded, thereby protecting contractors from unintended consequences. It does, however, recognise that there are difficulties and complications with the proposal, and commits to consulting during 2011, intending to implement the policy in the medium term. There remains a risk that proposals to exclude dividend payments are not carried forward.
The Government will retain IR35 in the interim, but will seek to improve the way it is administered. APSCo will engage with the Treasury in order to find a positive interim solution on IR35, but will oppose any changes to income tax and NICs that erode the benefits of contracting.
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