Revenue responds to ICA on 'three out of ten' report

The Inland Revenue has responded to ICA's highly critical report 'Towards a Better Tax System', by claiming that it contains inaccuracies.

The report from the respected Tax Faculty, the Institute's centre of excellence on tax matters, outlined ten tenets which make for good legislation. It then judged IR35 against the theory and awarded it a poor 30 out of 100.

The Revenue has made extracts of its letter to the ICA available on its website. The letter says the Revenue was disappointed at the verdict from the Faculty and expressed surprise that the report's authors thought 'that the Government's policy intention was not clear, when the use of service companies to avoid tax and NIC has been well known to the accountancy profession for years.'

The letter examines small details rather than commenting on the overall picture, which gave a resounding thumbs-down to the Government's approach to tax legislation in this area. It chose not to address any of the areas, including fairness and reasonableness where the Government scored zero out of ten.

Accountancy expert, Kevin Miller, said: "The Revenue seemed to have avoided addressing many of the key area's in the report such as unfairness and the undeniable impact on competition. Instead they have chosen to focus on comparitively minor and detailed points. The Tax Faculty is to be applauded for highlighting the problem areas and the Revenue should look at the bigger picture."

Gareth Williams, Chairman of the Professional Contractors Group, said: "The Tax Faculty report gave IR35 zero marks out of ten for fairness and reasonableness, zero for its effect on competition, one for constancy and two for consultation. This legislation is still before Parliament in the Finance Bill. It should be withdrawn forthwith.

"The Prime Minister should have taken notice and stopped this debacle or else we must all assume that he is content to have under-performing Ministers introducing second-rate legislation."