Tories propose abolishment of IR35

IR35 Test

As reported in the Telegraph, small business taxes could be cut by more than £500 million a year under proposals being published today by the Tories.

Oliver Letwin, the shadow chancellor, has identified three tax cuts he would like to implement in a "consultation paper" on taxation.

The three proposals are:

  1. abolishing the so-called IR35, at a cost of up to £300 million;
  2. abolishing the non-corporate distribution rate, at a cost of up to £340 million;
  3. and changing settlement legislation for husband-and-wife businesses (known as 'section 660').

'Menu' of options

Whilst this appears encouraging the consultation paper, like the others recently published, is being seen by Mr Letwin as a "menu" of options from which the party will choose.

The Tories will not say exactly which taxes they would cut in their first year until after Gordon Brown's Budget, which is likely to be in March.

The Tories think IR35 imposes unnecessary complexities and burdens on business. Although IR35 raises £300 million for the Treasury, Mr Letwin believes that abolishing it could actually save money for the taxpayer because there is some evidence that the tax has forced some contractors to go abroad. The Tories think the total tax yield could actually go up if such workers were to be encouraged to return.

Wait and see

Whilst this news is encouraging for those currently caught by IR35, one must be aware that this is currently a proposal on a 'menu' of options that could be chosen by the Tories if they are elected.

With labour unlikely to repeal IR35 themselves, combined with their current odds of 6-1 on of winning the next election contractors and small businesses should not get too excited about this recent announcement.

How would the changes effect you?

The removal of the non-corporate distribution rate will have no affect for contractors earning over £15 per hour.

For a contractor earning £35 per hour, abolishment of IR35 would result in an increase in take home pay of around £787 per month. . You can calculate your own personal savings using the IR35 tax calculator

To calculate how the proposal changes could affect you use the Section 660 calculator.


Alliance Accountants

Published: Monday, January 03, 2005

© 2014 All rights reserved. Reproduction in whole or in part without permission is prohibited. Please see our copyright notice. If you want to use any content you have seen on this site then please request our media pack and ask for details of our Content Licencing Service.

Inni Accounts


Readers Comments...


  
Bookmark and Share
  
     
  

IR35

Related Guides

IR35

What is IR35?

Related Calculators

IR35 Calculator

  
  

Latest Site Updates

ContractorCalculator: Contracting news in brief – 31/Oct/2014 ContractorCalculator: Contracting news in brief – 31/Oct/2014

News this week covers: BETs abolished; BBC test judicial review; late payment; high paying contracts; paper tax return deadline; & simpler CT filing.

Contractors gain greater tax savings and flexibility from pension reforms Contractors gain greater tax savings and flexibility from pension reforms

Contractors to gain upfront pension contribution tax savings and tax savings with flexibility on retirement, says ContractorFinancials’ Tony Harris.

IR35 taxes are a tiny proportion of the tax gap: surely HMRC has better things to do? IR35 taxes are a tiny proportion of the tax gap: surely HMRC has better things to do?

Contractors paying £1m a year in IR35 taxes is such a tiny proportion of the tax gap. Surely the taxman can direct HMRC’s resources more efficiently?

Contractors underpin new ‘lean’ workforce strategies adopted by contracting clients Contractors underpin new ‘lean’ workforce strategies adopted by contracting clients

Contractors offer increased capacity and specialist skills to contracting clients that increasingly adopt lean workforce strategies, says the REC.


  
  

Twitter

Follow Us On Twitter


  
     

  
  

Contractor solutions

Orange and Gold Accountancy Limited IR35 Test Clever Accounts Accountants Checklist Alliance Accountants Contractors Handbook
  
  

Contractor solutions

Contractor Accountant

Free consultation, incorporation and IR35 reviews. Find out more…

InTouch Accounting

Perfect mix of technology & personal service for only £92 per month.

Need an accountant?

Comprehensive service for £59 per month. Call now for a FREE consultation.

Parasol

The UK’s largest employment organisation - 0% risk, 100% compliance

Clever Accounts

Complete contractor accounting service. 24/7 online access. £69 pm!

Contractor Angels

More than just an Umbrella. Retain up to 90% of your earnings.

NA D J Colom Accountants Bedouin Group Parker Cavendish Contractor Financials NewsNow
  
Caprica Accountants Parker Cavendish Contractor Insurance Life Insurance

  

The UK's leading contractor site. Independently audited traffic (ABC) – 131,456 monthly unique visitors.