TaxPersonal TaxIR35 case could handicap IT workers

IR35 case could handicap IT workers

Employers may become reluctant to use the services of IT contractors after the judge ruling on the IR35 judicial hearing said contract staff may be entitled to the benefits of fulltime employees.

Judge Burton, referring to the ‘double standards’ in IR35, said that if a worker were to be taxed according to IR35 legislation – at a rate equivalent of fulltime employees – then the worker would have a very good case for claiming full employment benefits. These could include pensions, sickness payment and paid holidays.

This extra cost of employment could make IT managers wary of hiring IT contractors, thus reducing the demand for their services.

A spokesperson from IT managers association Premit told Computer weekly said: ‘It would be a double edged sword for contractors – they would receive more benefits but would probably find less work.’

And a strategic advisor at the Institute for the Management of Information Systems predicted that if employers lost the cost benefits of hiring IT contractors, they might move their operations abroad, or hire foreign-based consultants.

The judicial hearing on IR35 ending on Tuesday this week with the Revenue rebuffing claims by the Professional Contractors Group that the IR35 violated European Law and could be construed as state aid for large companies. The Revenue claimed it was a generalist measure aimed at stamping out tax avoidance.

A ruling is expected some time next week.

Links

PCG pleased with High Court opportunity

AccountancyAge.com IR35 resource centre

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