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The long-awaited outcome of the judicial review into the IR35
tax, brought by the Professional Contractor's Group (PCG), a
body of some 12,000 people affected by the tax which penalises
contractors who operate as one-man service companies (see
Private Eye 1024), was heard at the high court on Monday
2 April.
Mr. Justice Burton criticised the Inland Revenue's existing
tests for the tax, describing these as inappropriate, unclear,
inflexible, inaccurate and unhelpful and laid down new guidelines,
while leaving IR35 itself intact. The main proponent of IR35
has been the paymaster-general Dawn Primarolo, or Dim Prawn
as she has become known in the contractor community; but the
department of trade and industry (DTI) minister for small business
and e-commerce, Patricia Hewitt, has also taken a keen interest
in the issue.
Following a report in Computer magazine warning that
18 percent of contractors could leave the country as a result
of IR35, Hewitt raised concerns with the treasury early last
year. Since then, however, she has become something of a U-turn
minister. Shortly before Christmas she told a DTI select committee
hearing that she had heard of no small businesses affected by
a contractor exodus and claimed that only tens of contractors
have moved abroad as a result of IR35.
This is strongly disputed by the PCG which argues: "Most
independent surveys suggest that around 20-25 percent of the
UK's most skilled IT experts have left, will not return, or
are intending to take their skills overseas to more favourable
tax regimes." The e-minister is also a great supporter
"new" Labour's fast-track visa scheme which has made
it easier for the big IT companies, such as her former employer
Anderson Consulting to recruit cheaper overseas workers. Last
year India was at the top of the list of countries supplying
IT professionals to the UK under this system, with 11,474 workers
bypassing the usual rules requiring a job to be advertised and
remain unfilled before it can be given to a foreign national.
In October 2000 Hewitt spent a week in India promoting information
technology links between the two countries. Her boss, trade
secretary Stephen Byers, paid a second visit to India in January
to promote 'Trade Partnerships' and to open a new Marconi computer
factory in Delhi. In his opening speech he declared that India
was set to become "one of the most exciting knowledge-driven
economies of the 21st Century", a statement which rang
with bitter irony in the ears of British contractors affected
by IR35. In the same week Hewitt visited China and Japan to
promote Britain as "the partner of choice for trade and
investment in e-commerce and the new technologies".
While the recent high court judgment has improved the situation
for contractors, the IR35 tax reminds in place together with
the fast-track visa scheme. Is there any logic behind the solution
to the skills shortage in IT workers proposed by our "joined-up
government" - courting overseas partners while driving
home-grown IT specialists out of business, or out of the country?
Credits and Further Details.
This article has been re-produced, with kind permission, from
Private Eye Magazine -The cornerstone of British satire.
(shurely worth an O.B.N).
Web Site: www.Private-Eye.co.uk
Professional Contractor's Group
Web Site: www.pcgroup.org.uk
The Judgment: [ click
here ]
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