Personal service companies

The Government announced in the March 1999 Budget that it proposed to bring forward legislation, with effect from 6 April 2000, to combat the avoidance of income tax and national insurance where individuals were ‘employed’ via a personal service company.

The income tax provisions are to be included in the 2000 Finance Bill. The national insurance provisions (in the form of enabling legislation under which detailed regulations can be made) were added to the Welfare Reform and Pensions Bill which is currently before Parliament.

On 23 September 1999 the Government announced a number of relaxations to the proposals.

Accordingly, on 13 October the Government sought to make the appropriate amendments to the Welfare Reform and Pensions Bill, during its Report Stage in the House of Lords. These amendments were initially approved, but then the whole of the relevant clause was dropped from the Bill in a surprise Government defeat.