Tax threat to contract staff

THE GOVERNMENT could have to rethink its far-reaching tax reforms which will change the status of self-employment if it wants to avoid a brain drain of computer specialists, it was reported last night.

A Bill in the Lords will give the Inland Revenue powers to treat contract workers as employees of their client company for National Insurance purposes. Campaigners believe the reforms will not only prompt a brain drain of computer specialists, but also affect management consultants, architects and accountants who contract their employment through a personal service company.

The Inland Revenue expects to raise an extra pounds 450m in National Insurance contributions from the reform. But business groups say the Government's assumption that those affected will become full-time employees shows a lack of understanding of modern working practices, particularly in the Information Technology industry.