Primarolo has more questions than answers

Paymaster General, Dawn Primarolo MP, predicted that all sectors of industry would benefit from IR35 as the Government was able to target support on 'the real entrepreneurs'. However, not all MPs received such a 'comprehensive reply' after she received a series of written questions on IR35.

Paymaster General, Dawn Primarolo, answered a series of written Parliamentary Questions on IR35 (March 8), leaving many points hanging in the wind.

In written replies to the questions which had been submitted well in advance Ms Primarolo, with the aid of her civil servants, was unable to put a figure on the maximum tax and NI an individual will have to pay under IR35; pointed questioners to the Financial Statement and Budget Report and RIA for details of assumptions and net gains; regretted that she had no information about people who had moved overseas or were considering doing so; could not give a breakdown by industry sector although put a figure of 50,000 'personal service companies' that would be affected by the measure; and predicted that all sectors of industry would benefit from IR35

David Drew MP asked what is the maximum amount of (a) national insurance and (b) personal taxation that an individual will pay under the changes caused by the introduction of IR35.

Ms Primarolo replied: "The amount of personal tax and National Insurance Contributions that a personal service company will have to pay following the introduction of IR35 will depend on individual circumstances. It is not possible to provide estimates of the maximum amounts payable."

Shadow Paymaster General, Richard Ottaway MP asked what is the expected net revenue gain from the introduction of IR35; and what assumptions the Government have made as to the number of business closures and the extent of business migration overseas for the purposes of calculating this figure.

Ms Primarolo replied: "Estimates of the revenue which will arise from the proposed measure to stop avoidance of tax and National Insurance Contributions using personal service companies were included in the Financial Statement and Budget Report published on Budget Day in March 1999. Information on the assumptions used was included in the Regulatory Impact Assessment on the Welfare Reform and Pensions Bill which was published in October 1999."

Mr. Ottaway also asked specifically how many contractors operating through personal service companies have moved overseas (a) in each year since 1992 and (b) in the last year for which figures are available; and what is the Department's estimate for each of the next three years.

Despite previous claims that an exodus of contractors was merely scare-mongering, Ms Primarolo had to admit on this occasion that: "I regret that this information is not available."

Mr. Ottaway also asked for an estimate, broken down by industrial sectors, of the extra taxation that the introduction of IR35 will place on contractors operating through personal service companies (a) next year, (b) in

2001-02 and (c) in 2002-03, assuming current levels of tax rates.

Ms Primarolo again regretted 'that it is not possible to provide a breakdown of the tax liability arising from the introduction of IR35 by industrial sector which prevents avoidance of tax and NICs. However, a breakdown of the 50,000 personal service companies that are estimated to be affected by this measure by broad industry group is provided in the Regulatory Impact Assessment on the Welfare Reform and Pensions Bill published in October 1999.'.

A final question on the subject came from Nick St. Aubyn MP who asked which sectors of industry benefit most from the rules on national insurance contributions that would be changed under IR35 proposals.

Ms Primarolo predicted: "All sectors of industry will benefit from the changes we propose. IR35 will prevent avoidance of NIC and right level of tax, allowing us to target support on the real entrepre