Budget Commentary: IR35 at bottom of Government’s undo list

Senior analyst at Bloor Research, Mark Simmons, exclusively provides UKTECH with essential commentary on the budget and the implications it will have for contractors, the skills shortage and E-business in the UK.

UKTECH - What are your thoughts after the budget and the complete lack of a mention of IR35?

MS - "I think we knew that IR35 was not going to get a mention. It is now, at the bottom of the Government's list of things to undo. I don't think they have realised or listened to all the comments that have been made by contractors, business people or celebrities. It appears to be a case of we shall change it when it hurts us, and not when it hurts you. By not mentioning it, they also indicate that they are ignoring it or putting their heads in the sand. The 'No Comment' syndrome."

UKTECH - What are the implications for small businesses and contractors now in the UK?

MS - "Small businesses that are not classed as IR35, shouldn't be affected directly too much. There are benefits in the budget for research and development and intellectual property in the sense of tax relief. SMEs will find that the budget has indirectly affected them with the employee changes, such as share options and maternity, although this may aid employee motivation. It will cost businesses resource shortages and administration costs. For contractors, there is little change, a move to increase allowable expenses and business running costs would have been welcomed, but this does not appear to be the case. Contractors, not just in the technology sector, are obviously not important enough or considered valuable. The drift will continue."

UKTECH - The Chancellor talked a lot about supporting small business and enterprise, yet IR35 is set to further cripple both. Is this just rhetoric or are you hopeful that some good might come of it?

"The Judicial Review is the only hope for contractors and those subject to IR35" - Mark Simmons speaking of the importance of the PCG's imminent legal challenge to the Inland Revenue

MS - "There is nothing hopeful coming out of this regime for this topic. There is an underlying agenda, because it is impossible to be so ignorant to the cries of so many, and not just contractors. If they still think they are going to force people into permanent employment, they can forget it. If they think they are going to unfairly tax the expertise, it will fade away. How on earth anyone can hand and leg tie legitimate small business in this competitive world is crazy. After all the future of any industry sector depends upon the small acorns of today. If these seeds are not sown, then the future is going to be very bland, corporate controlled, uncompetitive and certainly more communist."

UKTECH - What now for the skills shortage and the rate of growth for companies who would otherwise be leading the global E-commerce market?

MS - "The E-commerce market is flourishing, products are appearing, a foundation has been laid and it is being built, rapidly, but not predominantly, by UK companies. It is the importing of technology that is paving the way. UK companies are still struggling and the resource problem is getting worse. Many technologies are finding themselves moving into the UK market place from abroad, such as from France, Spain, Portugal. It is interesting to see that they are becoming more advanced than us, if they are not already. I have heard that the skilled workers that have moved abroad are loving it in these countries. This all seems to go against the grain of a Government expecting to see the UK as the E-commerce leader, but it was something that they mentioned and may not have meant, or, did they mean 'a leading E-Government on-line service'.

"The skills shortage is not getting better, it is getting worse. Fast tracking from abroad is not working, and will never work, unless a taxation system is far more advantageous than that of the U.S.A. It is restricting company growth, but at the moment people are taking on even more activity and have to be extremely efficient in what they do - with this in mind one could speculate there will be more health problems in the pipeline."

UKTECH - The PCG has a Judicial Review against the IR next week to repeal IR35 - what hope do you have of this being a success and does it represent a 'last chance' for the Government to right the wrong it has made in ignoring it in the budget yesterday?

MS - "It is obvious that the Government is not going to back down willingly. The Judicial Review is the only hope for contractors and those subject to IR35. It will be clear from the outcome, whether the person is unbiased, honest and has strict morals, or whether the appointed person is only a Government puppet.

"I strongly believe that the results of the review will be favourable, as it is not just IR35 victims that are complaining, but many other members of our nation that are concerned about retaining our fairness across our land."

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Mark Simmons has worked in the IT industry for over 20 years.

Bloor Research is one of the world's leading IT analyst and consultancy organisations, providing independent expert IT research and advice.

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Richard Powell, UKTECH