The Labour government introduced the IR35 legislation in March 1999 to remove what it saw as a loophole for IT contractors and others to trade as limited companies to avoid tax and National Insurance Contributions, in circumstances where the individual worker would otherwise be an employee of the client for whom they work.
The Professional Contractors Group (PCG), a representative body of independent contractors operating in many sectors, including IT and engineering, has long argued that the proposals will actually catch any limited company worker (or similar intermediary) who is working for a client, “but who does not meet the outdated definition of self-employment.”
Shadow Trade and Industry Secretary, David Heathcoat-Amory, said:
“IR35 was a sly measure which turned into a disastrous attack on the IT sector. In seeking to eliminate the bad it destroys so much that is good. The Government fails to understand that contracting out is a legitimate and growing practice in IT and other sectors.”
He added:
“Labour have been deaf to the reasonable representations from the industry. By contrast we are taking positive steps to free people who are essential to the new economy from this repressive measure.”
The Conservatives say there will be further consultation with the industry before replacement legislation is put forward.