UK Government Urged To Review IR35 Legislation

by Robin Pilgrim, LawAndTax-News.com, London

05 August 2003

The All Party Parliamentary Small Business Group has urged the UK government to review its controversial IR35 legislation, arguing that the amount of revenue that it actually brings in may not be sufficient to compensate for the negative impact that it has on businesses in the United Kingdom.

The cross-party body, which is comprised of MPs and Peers, and acts as a liaison between the business community and Parliament, has recently compiled a report on the situation of freelance workers and contractors.

In its report, the All Party Parliamentary Small Business Group revealed that the uncertainty which arises from the fact that there is no concrete agreement between the Inland Revenue and the tax community as to exactly which taxpayers fall under the terms of IR35, impacts on the country's competitiveness and attractiveness as a location for business.

The Group also warned of a potential brain drain, with contractors and skilled freelancers seeking work overseas, in more tax friendly climes.

'The government should carry out a detailed review of IR35 to ensure that the costs in terms of the impact on the freelancer market are justified by the benefits in terms of the taxation impact. There is little real evidence that IR35 has proved cost effective in terms of dealing with tax avoidance without also impacting genuine businesses,' the cross-party organisation announced in a statement.

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