Chancellor Alistair Darling has been urged to drop the controversial IR35 tax rules in his pre-Budget report in order to help struggling contractors and freelancers through the recession.

The Professional Contractors Group said that freelancers had become one of the first victims of the recession, with turnover falling by a third and the number of freelancers in work dropping 12% over the last year.

It argued that removing the “largest single impediment to freelance working” would improve contractors’ ability to retain work and would cost the government little, according to Contractor UK.

In a letter to Darling, PCG chairman Chris Bryce said the legislation creates massive and crippling uncertainty for freelancers and that “IR35 is not known to be a revenue-raising measure”

Bryce also asked the government to drop its proposals on income shifting, which has already been postponed.

“Treating jointly-owned businesses any differently to other businesses is iniquitous and unfair,” he said. “These proposals fail to take into account the shared risk and responsibility involved in running a business, and would harm thousands of such enterprises.”