Tax changes may prove beneficial for IT industry

Far from hurting the IT industry, the UK government's IR35 proposals affecting one-man service companies will be beneficial, according to many Silicon.com viewers.

The legislation, which looks likely to become law for the next tax year, will see IT contractors paying the same levels of tax and national insurance as fulltime staff.

Ex-IT contractor, Paul Webber, argues that the current tax advantages make it more difficult to hire fulltime staff, which in turn is driving the IT contractor boom and charges in the UK.

"Britain needs an end to the IT contractor boom and a return to employing IT staff as a fulltime employees, paying normal taxes and national insurance. Far too much money is currently wasted on exorbitant contract rates in the country. Freed of the burden of paying for contractors, companies would be able to expand their IT spending where it is really needed," he said.

Webber added: "The current short-term outlook of those trying to make a fast buck out of the industry does nothing but harm the way in which IT staff are viewed by corporate management. If we want them to think they are getting good value for money - and thus invest more in IT infrastructure - this is not the way to go about it."

Another Silicon.com viewer, who acts as mentor for small UK IT companies, believes the current laws are doing more damage to small IT businesses than the proposed laws.

"The tax advantages available are actually killing many small IT businesses that are trying to build their companies legitimately. These companies are being damaged because they incur the cost and disruption of training staff, only for the staff to leave to set up one-man consultancies to take advantage of the tax benefits."

But as one IT contractor pointed out, genuine contractors are forced to set up a limited company because the governments PAYE processes are too complex. "If the government really cared about small businesses, it would look at it from my point of view and do something radical to simplify the PAYE system for employers," he said.