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Tax advisers fear self-employed tax plans

FRESH concerns over how the Inland Revenue intends to classify workers have been raised this week with tax experts predicting a rash of firms facing closure.

Last month the Revenue announced it was delaying plans to introduce its CIS tax scheme by 12 months. It was due to be implemented next April but will not now be introduced until spring 2007.

The Revenue has admitted that in the meantime it is extending its clampdown on firms incorrectly classifying workers as self-employed.

One Whitehall source warned that firms falling foul of the Revenue's classif ication rules would be dealt with harshly. He said: 'There will be no generosity this time around.' But one tax expert said the Revenue's clampdown on status will mean contractors will be unfairly forced to shoulder extra costs.

Alastair Kendrick, a partner at accountant Wilder Coe, said: 'The Revenue wants to set up an approach for contractors to follow that will make it easy to determine whether a person should be engaged.

'If this is introduced it will significantly move the goal posts and the number of self-employed workers will be reduced greatly. This in turn adds to building costs as it is more expensive to take on employed rather than self-employed labour.' He added: 'If this is successful the new CIS will be easy to apply as the numbers it impacts on will be greatly reduced.' And payroll advisor Carolyn Walsh said: 'The factors that determine self employment can be interpreted a number of different ways, which leaves the industry open to grave financial risks.'