IR35 History | 28 June 1999 | Joint submission to the Inland Revenue

Joint submission to the Inland Revenue from: Federation of Small Businesses, Professional Contractors Group, Independent Computer Contractors, and the Association of Temporary & Interim Executive Services.

Reference: Recent meetings held on 10th and 11th June 1999 at the Inland Revenue, concerning proposals to change the fiscal regime for small businesses. Announced in press release IR 35.

We are writing as organisations who represent many of the businesses who find themselves at the "sharp end" of the legislation proposed by IR 35. We believe that our position to the present proposals was made clear at the meetings on 10 and 11 June. They are, in our view, unduly complicated, unworkable and disproportionate to the problem as outlined in the Press statement; IR 35. Furthermore the potential economic and political consequences will be far greater than suggested by the Regulatory Impact Assessment

We believe the proposed "control" test for "disguised employment" is unreasonable and that it fails to take account of the realities of the modern knowledge based economy: it would result in real small businesses (many of them with ambition to be large businesses) being arbitrarily treated as if they were merely devices for tax avoidance. These companies, especially in the IT and engineering field, are an important engine of economic growth and it is surely counter to Government policy to discourage them, as this measure would do.

We should point out that adoption of such a narrow test would in fact change the definition of employment/self employment and contradict the statement in IR 35 "There is no intention to redefine the existing boundary between employment and self-employment."

As such, a disproportionate number of small businesses, who do consider themselves engaged in "genuine entrepreneurial activity" will be disadvantaged when compared to their larger Competitors. We understand from the meetings that these changes have been Lobbied for and note a recent article in the Times (24 June) which states, when discussing the background to this issue "Nor does it go down well with the large IT consultancies such as EDS, for example. It was organisations such as these that first alerted the Government to what they perceived as a problem. They felt that if they could break up the tax advantages that individual consultants had it might bring down what they saw as the exorbitant rates charged by them"

We support the objective of IR 35 to achieve "a tax system under which everyone pays their fair share" and would support and assist in developing targeted and proportionate measures to tackle abuse of the existing system, however there is a growing concern that measures to target such abuse are being used by larger Companies, often with strong Government connections, to drive smaller competitors out of business

When this is coupled with the last minute amendment to the Welfare Reform Bill we are sure it will be appreciated that Government stating we are engaged in "genuine consultation" is treated with some suspicion. We already note that the bill, which refers to a "Certification" scheme, would now appear to be contradicted by statements at the Revenue meetings that this should now be called "Registration"

We would ask that the Government engage in a proper consultative process to ensure targeted and proportionate measures are taken to meet the objectives set out in IR 35.

Approved on 28th June 1999

Andrew White: Professional Contractors Group (PCG)

John Whiting: Association of Temporary & Interim Executive Services (ATIES)

Mike Cullen: Independent Computer Contractors (ICC)

Simon Sweetman: Federation of Small Businesses (FSB)