Re: Not about IT?
Personal Service Companies are a figment of HMRC's imagination. There is no legal definition.
There is no 'loophole' Contractors act as a limited company because of previous legislation that made it impossible for contractors to act as a self employed person and pay even less tax. The tax most contractors are avoiding is about 10-15%, they do however get no employment benefits so maybe that is a fair trade off?
This putting contractors into a one size fit all harness keeps failing.
The result of this will either be
1. All the contractors become highly paid permies swapping their daily rates for equivalent salaries. They & their employers then hand over oodles of tax to HMRC. Agencies disappear. Watch out for Airborne pigs.
2.Contractors end up working for agents at same rates or more likely lower rates maybe 10- 20% meaning less tax.
3. Contractors end up working for contractor agencies which incorporate abroad and or figure out how to avoid tax. Companies get to pay costs abroad so avoiding UK tax.
4. Companies import ICT workers and pay them minimum wage after deductions so they can claim tax credits = negative tax. IT workers retire or work abroad.
5. Companies can't find contractors to work for them in London etc because of lack of expenses so they offshore work. We loose skills and any lead we had in IT or similar.
6. Contractors find a way to work round the legislation and ignore it which was what happened with IR35. As they are fed up of being targeted more people do it.
every valid option above means lower tax take. This proposal is not the way to fix it. Lets have a point based system that can be applied fairly and identify those disguised employees and the real contractors.
Amusingly enough I now know 8 contractors who started "real businesses" funded originally by generous fees from contracting. They employ staff and pay lots of tax. They would probably not have launched their business as a permie with a none compete & employer owns IP clause in their contracts.