LONDON, Aug 17 - Britain's opposition Conservative Party has today proposed scraping IR35. This is an official statement by the Economic Competitiveness Policy Group announced today in the City of London.
Not only should IR35 be scrapped, but they said that they do not propose to replace it with anything else, effectively turning the clock back.
Regarding the managed service company legislation, they said it would be reviewed, but have not made a commitment to scrap it and allow composites back onto the market.
On another note, group co-chairman Redwood says that Britain could opt out of EU regulation. This could include the regulations on temporary work which the PCG has protested against.
Shadow chancellor Osbourne: "Our tax code is the longest and most complicated in the world. We are committed to simplifying it. The Conservatives will make the recommendations in this report part of our party programme"
The Conservatives are working with the international accounting firm Price Waterhouse Coopers to change contractor tax law.
Our tax code is the longest and most complicated in the world. We are committed to simplifying it
George Osbourne - Shadow Chancellor
IR35 - Background
IR35 is a piece of tax legislation announced which took effect from April 2000. The legislation means that the Revenue can tax some contractors as though they are employees of their clients. Contractors caught by IR35 pay significantly more tax reducing their take home pay by up to 25%.
HMRC’s intention was to tackle tax and National Insurance (NIC) avoidance schemes through the use of intermediaries, such as Partnerships or Personal Services Companies (PSC).
The Revenue’s view was that a large number of IT Consultants, Engineers, non-executive directors and “one man band companies” were often treated as self-employed when in fact they should have been treated as employees of the end Client. This was based on the terms and conditions that the Contractors worked under.
The Revenue argued that if the agency or the PSC were removed, a large number of contractors would really be “disguised employees” who should be included on the client payroll and have tax and NIC deducted each month.
A full report live from the press conference will follow shortly.