TaxPersonal TaxMinister says IR35 was ‘cumbersome’

Minister says IR35 was 'cumbersome'

A senior government minister has admitted that the introduction of IR35 was badly handled and that the original proposals on IR35 were much too cumbersome.

In an interview with IT website Silicon.com, e-minister Patricia Hewitt said the original plans would have put too much of a burden on employers as well as contractors.

‘The original proposals on IR35 were much too cumbersome and would have put too much burden on employers as well as contractors,’ said Hewitt.

IR35 regulations are aimed at countering tax avoidance, which the government believes stems from ‘disguised employment’. IR35’s effect is to treat small companies contracted to larger ones as directly employed and by doing so cutting them off from tax benefits they would otherwise enjoy.

And although Hewitt said the final version of the controversial tax legislation was right, she hinted the Inland Revenue might be willing to alter the rules in the future.

‘We’ll monitor it over the next year just to see how it is working in practice, but quite honestly the very alarmist talk we were getting – from the Conservatives amongst others – of thousands of skilled IT professionals fleeing the country simply hasn’t happened,’ Hewitt told the website.

Efforts by the anti-IR35 body the Professional Contractors Group to overturn IR35 in the High Court ended in failure when a judge said he could not rule that the legislation contravened the Human Rights Act.

Despite bitter disappointment, campaigners hoped criticism in the ruling would lead to new guidance from the Revenue.

Links

IR35 resource centre

Silicon.com

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