The effect of the proposed changes could mean that an individual working through a personal service company will have to be remunerated through PAYE after only one month of working for a single employer. This is going to have far-reaching tax implications and completely change the way individuals work.
It is estimated that the proposed change will effect 90% of individuals working through personal service companies. The effect is going to mean that employers will need to pay income tax and National Insurance contributions.
It is currently suggested that HMRC will generate a further £400 million if this change is implemented.
Their effect would be to shift about 90 per cent of individuals now working through PSCs into the PAYE system, thus forcing them and their employers to pay full income tax national insurance contributions, and reducing the scope for tax evasion. This, it is being suggested, could generate an extra GBP400 million of HMRC receipts.