Primarolo defends IR35 in the Times as PCG dismisses her comparison

The Paymaster General continued her letter-writing campaign to newspapers by responding to a recent article in the Times which expressed concern about the large number of businesses which would be affected by IR35.

Dawn Primarolo wrote (November 20): "Fran Littlewood's article ("Taxman's net spreads wide confusion", Money, November 11), accuses us of misrepresenting the effect of the legislation on personal service companies, known as IR35. Unfortunately, her article risks alarming people who are unlikely to be affected.

"Those who will be affected are typically employees, but employed by limited companies which they have bought "off the shelf". Arranging their affairs in this way allows them to avoid being treated as an employee of the companies they work for, when in reality they work alongside other employees, doing the same jobs, often staying with the same client for many months or even years. Before this legislation, they typically paid only 21 per cent of their earnings in tax and national insurance, compared with 35 per cent paid by an employee on comparable earnings.

"Our legislation will correct this and will ensure that the tax and national insurance regime designed for the self employed will apply only to those who are genuinely small businesses, taking risks and creating wealth and employment.

"If people are still confused, I recommend that they consult the Inland Revenue website, or ask for leaflet IR175 at any tax office."

A PCG spokesperson said: "Every time the Paymaster General puts pen to paper, she demonstrates her lack of understanding not only of the knowledge based economy, but in this case also of her own legislation. She continues to spin a comparison between an employee and a business, even after the High Court has dismissed the Revenue's argument as 'artificial' to suggest that it was about individuals rather than businesses.

"It seems bizarre that the Paymaster General thinks that the fact that someone has bought an 'off-the-shelf' company is an indicator to anything other than they have bought an 'off-the-shelf' company.

"The PCG will be responding to her points."

--

Susie Hughes