Rolling NICs into Income Tax to solve IR35. Realistic?
IR35 targets personal service companies, whose owners pay themselves a small salary and the rest in dividends. Because NICs are not due on dividends it means a significant reduction in tax bills.
The IR35 rules say that if you are really a "disguised employee" then you have to pay tax as if you were an employee, including the employers NI and employees NI.
IR35 isn't working. HMRC don't catch many people, and contractors running limited companies can take pre-emptive steps to fairly easily defend any IR35 attack.
The Mirrlees report suggests rolling NICs into Income Tax. The £100 billion currently raised through NI would need to then be raised via Income tax (approx £150 billion).
It all sounds rather simple and obvious, but what are the practicalities of doing this? How big is the can of worms we are looking at? How many levels of sticking plaster on the curernt system would need to be pealed away and fixed?
Is this a pipe dream?
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