Consulting firms such as architects and engineers say this will make it harder to use self-employed consultants to cover peaks in workload.
WSP managing director Chris Cole said: “We probably employ 15% of our workforce, at technical level, on a service company basis, so we can cut that top layer as workload moderates. With these new proposals, we will lose that flexibility.
“We will look at how we manage a business without it. When the next recession comes we’ll have no ability to de-gear without hurting the permanent people.” A spokesperson for the Inland Revenue said the tax measures, “Countering avoidance in the provision of personal services”, were intended to recoup £220m in NI contributions and £80m in income tax.
Consultants operating as such services companies make themselves director of the one-person company. They pay themselves zero salary but collect a dividend only liable for corporation tax, which was 20% last year and 10% this year.