A tax on enterprise
From Manuella Phillips Sir: In your article 'Labour loves the fat cats' (8 April) you mention an 'arcane change to National Insurance rules last year which made it much more expensive and complicated to give generous share- option packages to recruits'. However, you failed to mention an even more arcane change, the IR35 rules. These rules, which came into force on 6 April this year, will tax small IT and engineering consultancies as if their total turnover were the income of the majority shareholder. This means such small consultancies will be unable to com- pete with the larger consultancies — Labour's own figures suggest that 66,000 companies will be put out of business, affecting some 100,000 workers.
Why is this relevant to your 'fat cats' article? Well, these rules only affect com- panies where the worker is also a majority shareholder (majority in New Labours- peak being more than 5 per cent). So those fat cats who do no work may contin- ue to live off the dividends, while those entrepreneurs who actually wish to get their hands and their minds dirty will be taxed out of business. Fair? Only in New Labour land.
Manuella Phillips
Director, KMIT Ltd, London W9
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