OFT narrows competition review to law and accountancy, ruling IR35 out
Some contractors feel that the Office of Fair Trading has moved the goal posts on its review of the competition restrictions in the professions to exclude professions affected by IR35.
In June, an article in UKTECH drew attention to a request by the OFT for information about unfair and anti-competition business practices among professions. The report did not restrict the scope of the review, in fact, it welcomed evidence from all quarters.
The report said: "The scope of the current review is not limited to the identification of restrictions which have their origins in professional rules or conduct. The review hopes to highlight specific restrictions whatever their origin. We are also interested in identifying restrictions which originate in national or Community law.
"We would welcome information on any significant uncompetitive practice."
Many readers of UKTECH and the contractors' representative body, the PCG, submitted evidence to the OFT about the restrictive practice of IR35 and how it was unfairly affecting competition for the small companies against their larger competitors in many professions, including IT and engineering.
However, Grahame Horgan of the OFT's Competition Policy Division, who is conducting the review has now excluded certain 'professional activities', namely those associated with IR35.
In a standard letter to those people who responded to his request and explained the restrictive nature of IR35, Mr Horgan says:
"Thank you for your response to our consultation document of 30 May issued in the context of the Review of Competition Restrictions in the Professions. In your response, you suggest that the operation of Inland Revenue Rule 'IR35' might constitute a restriction that falls within the scope of the review.
"In order to make the best use of the limited resources available for the review, the scope of the review will extend to a small number of professions and the principal focus will be law and accountancy. We hope that this focus will enable us to bring to bear a greater level of analysis on the restrictions which affect the professions selected. Because your professional activity does not fall within the field of enquiry of the review, I am unable to take the issue forward for further scrutiny in this context.
"The Office of Fair Trading has considered previously whether IR35 raises issues which might be addressed using other competition law powers at the disposal of the Director General and, in particular the Competition Act 1998. This Act, which came into force on 1 March 2000, prohibits anti-competitive agreements between undertakings and prohibits also abusive conduct by undertakings holding a dominant position.
"The issue raised in your response concerns taxation schemes administered by the Inland Revenue, pursuant to Acts of Parliament. The Director General does not have the power to challenge the will of Parliament expressed through statute.
Accordingly, I suggest that you liaise with the Inland Revenue directly about the issues which concern you.
"I appreciate that this is not the response for which you would have hoped, but I hope that the explanation above assists you in understanding why we do not feel it is appropriate for us to take forward this issue."
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Susie Hughes