Tax crackdown on personal companies

Mar 24 2012

High earners who are paid via their own companies rather than direct from their employers face a crackdown on their tax arrangements, Chief Secretary to the Treasury Danny Alexander has said.

The Government is to launch a consultation on plans to tighten the rules on who can count themselves as effectively self-employed, potentially avoiding income tax bills and instead paying corporation tax at the much lower rate of 20%.

A review into the use of private service companies among senior public sector officials is being led by Mr Alexander.

Proposals which would apply to the private sector as well would mean that "office holders" or "controlling persons" would in future have to be taxed at source through PAYE.

The Times, which reported the move, said the changes could have implications for television presenters such as Jeremy Paxman and Fiona Bruce, and Labour's mayoral candidate Ken Livingstone.

Liberal Democrat Mr Alexander told the paper: "Everyone should pay their proper amount of tax."

He also defended Wednesday's Budget, which has attracted a high volume of criticism, particularly over the so-called granny tax - the phasing out of age-related tax allowances.

He insisted pensioners would still be net beneficiaries because of the uprating of the state pension.

"In the end, I think it's fairer to have the same level of personal allowance for everybody," he said.

And he maintained it was "totally wrong" to suggest the rich were being let off by the cut in the 50p top rate of income tax to 45p.