Primarolo steers around IR35 ‘employee benefits’ issue

Paymaster General Dawn Primarolo has responded to questions in Parliament regarding IR35 saying "the Inland Revenue will review the guidance material used by its staff". However, she steered around the issue of employee benefits for those who stand to be hit by the legislation saying, "IR35 would not affect their employment rights."

The questions were raised by Dr Vincent Cable, Liberal Democrat MP for Twickenham and a regular broadcaster and columnist for The Independent and The Economist.

Dr. Cable first asked Dawn Primarolo "what assessment has been made of the additional costs of benefit entitlements by contractors deemed to be employees under IR35," to which she replied, "IR35 does not affect the employment rights of any worker employed through a personal service company in any way."

Dr. Cable then asked her what revisions were planned to be made to the Inland Revenue rules consequent upon the judgment of the IR35 case, to which she replied, "The court dismissed the challenge to the legislation on service provision by intermediaries. The Inland Revenue will review the guidance material used by its staff regarding the interpretation of the law."

The possibility that contractors working for clients be able to claim the same benefits as those awarded to the company's employees was raised by Judge Burton himself during the PCG's judicial review. He said in his judgement 'There is no binding conclusion that [a person] is an employee simply because he is to be treated as if he were one for tax purposes, but if so advised he could seek to raise arguments to that effect.' He also said during the review "It seems illogical to tax personal service company consultants as employees if they are not also to be entitled to employee benefits."

Employment benefits specialists have predicted that IR35 could cost employers in the UK an estimated £2 billion if 90,000 consultants become eligible for employee benefits.