PCG response to Budget

The Professional Contractors Group attacked the Budget as small entrepreneurial businesses continue to close down or move overseas, while the Chancellor talks about his commitment to e-commerce and small businesses.

Chairman of the Professional Contractors Group, Gareth Williams said: "The Chancellor had an opportunity to right the IR35 wrong of twelve months ago.

"Far from his stated intention to 'remove the old barriers to investment and enterprise', the Chancellor is erecting new and higher barriers. Small software start-ups will risk being treated as employees of their first client and taxed on 95% of turnover. This is a catch 22 situation. How will they ever get to the point of having multiple clients to escape this legislation?

"Gordon Brown tried to sound like the E-Chancellor with frequent mentions of e-commerce and enterprise. However, he - and the rest of the Government - will learn to their cost that there is more to being world leaders in high technology than repeating the jargon and giving tax breaks on computers. Computers alone don't drive the e-commerce revolution - the people at the cutting edge of programming them are fundamental and it is many of these people the Government is targeting with IR35.

"These people are closing down their businesses and taking their skills - which are in demand around the world - overseas.

"Even the Government must recognise this because, coinciding with the Budget announcement, was another one about how the UK will relax visa entry requirements for IT specialists from non-European countries - presumably partly to fill the brain-drain IR35 is creating."

After last year's Budget, an Inland Revenue press release, IR35, announced the introduction of a new tax regime for knowledge-based companies, which, according to the Government's own estimates will force 66,000 small businesses to close down.

This year the Chancellor did not mention IR35, although Conservative Leader William Hague used it as an example of 'stealth taxes' in his reply.

The Professional Contractors Group, which represents the views of more than 6,000 contractors, has continuously campaigned against this unfair measure. However, the Government has chosen to ignore the weight of evidence against the proposal.

Further information is available from PCG's website