TaxPersonal TaxIR35 puts contractors out of work

IR35 puts contractors out of work

The controversial tax measure IR35, aimed predominantly at IT contractors, has increased the number of contractors out work, while doubling the number of businesses that have gone permanent, according to new research.

More than 30% of freelance IT specialists are now ‘resting’ compared with 11 per cent in 2000. At the same time the proportion who have closed their businesses to go permanent has doubled to 16%, according to the poll of 1,500 conducted last month by contractor website Shout99.

Richard Robson, a director of anti-IR35 campaigners, Professional Contractors’ Group, has worked as a contractor for 14 years but has himself been off contract since January. ‘We’re not asking for sympathy. It’s pretty clear that we’re in a recession but tax rules and bureaucracy are compounding the situation,’ Robson said.

Robson blamed controversial tax legislation IR35 together with ongoing abuses of the government’s fast track visa scheme for adding to contractors woes.

‘In principle contractors should be investing in the good times to give themselves a buffer, but IR35 makes that very difficult,’ Robson said. ‘With the fast track visa scheme, the onus is still on us to demonstrate that a skills is not in short supply.’

A spokesman from the Home Office said the dossier presented by the PCG in May outlining alleged visa scheme abuses was being investigated. ‘Workpermits takes the allegations very seriously but the work is ongoing and it would be unfair of us to comment until it is concluded,’he said.

The number of contractors who have closed their businesses and retired has also risen, from 1% to 5%, and those choosing to work fewer hours and take more holiday or forced breaks has halved, from 23% to 9% in 2002.

Earlier this year, the PCG lost its bid to have the IR35 legislation abolished.

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