IR35 has no effect on wages - Primarolo

A recent UKTECH story which examined how IR35 gave a tax advantage to large consultancies over their smaller competitors was the genesis for a parliamentary question to the Paymaster General recently.

The article, 'Unfair, Anti-competitive or xenophobic' revealed how a large foreign-owned company was paying low wages to employees while hiring them out at substantially greater rates - the difference being accepted as profit or available for reinvestment. While a contractor working in a similar relationship with his own company would have to treat his entire fee (less five per cent) as salary. The Professional Contractors Group publicly criticised the Government for allowing this to happen.

Mr. Nigel Jones, LibDem MP for Cheltenham and a member of the Select Committee on Science and Technology, asked Ministers what assessment had been made of the views expressed by the Professional Contractors Group concerning the effect of the IR35 proposals on (a) the wages paid by large foreign-owned companies and (b) United Kingdom entrepreneurs.

In a written reply (July 17), Paymaster General, Dawn Primarolo, said: "There is no reason why the IR35 changes should have any effect on the wages paid by large foreign-owned companies or on genuine UK entrepreneurs."

Mr. Jones also asked what recent representations had been received concerning IR35, to which Ms Primarolo replied: "We continue to receive correspondence expressing a range of views on this policy."

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Susie Hughes