IT professionals 'will quit Britain over tax changes'
by ROSS DAVIES
BRITAIN'S chances of becoming the hub for e-business in Europe are being put at risk by a 'last-minute' Government addition to a bill being debated by the Lords this week, Treasury Secretary Dawn Primarolo was warned today.
On Thursday the House of Lords is due to debate a modification to the Government's Welfare Reform and Pensions Bill, which seeks to increase PAYE and National Insurance revenue by classing even short-term contractors as 'employees' of their clients.
If passed, the legislation will cause a brain drain of many thousands of IT professionals, who will quit Britain for Europe and the US where there is more favourable temporary employment legislation, say IT agencies who market individuals' professional skills.
Jon Stewart, a director of Walton-on-Thames recruiter Attwood Stuart, says more than a third of the 35,000 IT experts on the agency's books could quit Britain if the Welfare Reform Bill becomes law because as 'employees' professionals will not be able to recoup their investment in computer and communications systems.
The Professional Contractors' Group says 32% of its professionals will go abroad, and 46% would consider it.
'The proposals for contractors should be postponed until next year's Finance Bill so there can be proper consultation,' said Peter Flaherty.
Flaherty, who is deputy chairman of specialist IT recruiters MSB International and a member of the executive of the Association of Technology Staffing Companies, added: 'Instead of attacking every company in the country, the Government should target the companies where everybody knows tax avoidance is taking place.'
The Government has yet to make it clear whether it is the buyer of the IT contractor's skills or the agency through which he or she finds work that will be responsible for the employer's share of charges and for doing the extra paperwork.
Many individual contractors in IT and other industries form limited liability companies, who issue invoices for their work which escape PAYE and NIC.
Some professionals pay themselves or are paid very little salary but take or are given high 'dividends' which also escape charges.
The PAYE and NIC proposals were tacked on to legislation reducing disability benefits when the Welfare Reform Bill went to the Commons for its first reading this summer.