IR35 - Jobs At Risk
This fact sheet explores the UK Government-Inland Revenue IR35 proposals. They will affect over 300,000 people, and immediately put an estimated 66,000 jobs at risk. It explores some of the likely motives behind them.
WHAT IS 'IR35'? In the 1999 budget, Chancellor Gordon Brown announced he was taking action to stop staff leaving a company and returning as a contractor, avoiding National Insurance payments. However, in a draconian move, the Inland Revenue's (IR) proposals, IR35 went well in excess of this; they mean:
Motives such as being able to move around to gain experience, choose one's own work patterns and control one's own career development are more common than 'tax avoidance'. (There is nothing illegal about 'avoidance' - it's 'evasion' that is illegal!! Where contractors pay themselves out of profits (dividends), the sums are often spent on keeping themselves and their families from being dependent on state assistance - something the Government is supposed to support.
"Client companies" who currently benefit from contractors' services stand to lose. In areas of skill shortage, contractors might be tempted to drop out or work abroad - thus making skills shortages worse. Some who work through agencies might have to raise their charges to offset the losses. In any case, much work would be created by the upheaval of having to put extra staff directly on the payroll.
Not surprisingly the proposals are opposed by
There must be something very important behind the proposals for the Prime Minister to go against his own word.
ECONOMIC BACKGROUND TO THE PROPOSALS
Computer professional Michael Wigley has noted that the proposals will bring the UK into line with German employment practice.
In 1997, keen to show his pro-European credentials, the new Chancellor Gordon Brown supported EU proposals to eliminate "harmful tax competition'... proposed by... Germany. In March 1998, a specialist journal, Taxation Practitioner, revealed the German Finance Minister had for some time been complaining at how low tax rates in Britain were, depriving his government of billions in lost tax.
On 17 November 1998, a formal agreement - The New European Way - was reached with the EU's predominantly left-wing governments on "tax co-ordination". Former Government adviser Patrick Minford condemned the moves "There is no way that their taxes are going to come down to meet ours" (Times, 19.11.98)
European Tax Commissioner Mario Monti had already made it clear that "reform" of the tax system was targeted where national tax levels were less than the EU average. (Read "Britain". See Daily Telegraph, 22.10.97). The EU/EEC has been looking at "crucial" tax harmonisation since at least 1975, following the Ruding Report, 1992, the EcoSoc Committee spoke in 1996 of the logic of having "tax conditions equivalent to a single state"
By coincidence, New Labour also forced through the Amsterdam Treaty on European Union (1997, Article 58.1.b) that insists upon measures to end "tax avoidance" (undefined).
On 18 March 1999, i.e. around the time of the Budget, three EU committees met - UNICE, the European employers' federation; ETUC, representing trades unions, and CEEP, representing the public sector. They agreed a document "Framework Agreement on Fixed Term Work", which talks of work to Social Chapter "policy requirements" and "collective agreements" - even if in the case of the latter, none exist within the company or industry directly concerned.
In short, the livelihoods of hundreds of thousands of fixed term contractors and the trades that depend on them are to be manipulated for political reasons
It notes that the European Commission intends to propose a "legally-binding Community measure". Britain will have no veto, therefore the only way to preserve the interests of many highly-skilled workers will be to "name and shame" the Government and its accomplices into dropping the moves.
NB None of the organisations concerned are connected with New Alliance
OTHER INTERNET ARTICLES
The British Chambers of Commerce lists the Government's own calculations that the measures had cost British business £523m (as at May 2002). The recurring financial cost is given as £300m p.a.
The Government does not quantify the considerable stress experienced by Inland Revenue staff in having to work with inconsistent and unwieldy guidelines. Nor does it predict the potential damage due to evolving EU proposals for 'equality' between temporary and permanent staff - these unwanted 'benefits' will create further admin overheads and have to be paid for out of money that would otherwise be paid to temporary staff.
With acknowledgements to the research of Dr. Peter Gardner; Christopher Arkell, Freedom Today, June 1999.