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The Programme for Government plans to reassess just how small businesses are taxed and replace the IR35 rules with a new law which will tackle the issue of tax avoidance but be less restrictive to a small business.

The Professional Contractors Group (PCG) was formed specifically to tackle matters such as the IR35 and has welcomed the announcement from the new Government.

A spokesman from PCG said:-

“We are delighted that he new Coalition Government made this commitment to review IR35 as a priority only days after taking power. For the last ten years PCG has campaigned for honesty and fairness when dealing with the UK’s 1.4 million contractors and freelance workers. With the end of the iniquitous IR35 we have the opportunity to achieve fairness.”

The IR35 legislation was introduced by the Labour government in 2000 in response to growing feeling that a high number of IT contractors were avoiding tax by defining themselves as independent companies and paying themselves low salaries but high dividends therefore avoiding income tax and national insurance contributions.

HMRC had expected to raise £220 million by bringing about this new rule but instead have only, on average, raised around £1.5 million per year.

The news that the IR35 is finally ready to be reviewed has been welcomed with open arms by both IT contractors themselves, campaigners against the IR35 rules and accountants who feel the rule has caused nothing but problems since it was introduced.

Only time will tell as to whether or not our new Government will actually change these rules but we will keep you updated as and when there are updates on this widely anticipated story.

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