The UK Government found parliamentary time to bring IR35's parent bill back to the House of Commons - making it very likely that the contractors' tax increase will go through during this parliamentary session. The Professional Contractors' Group (PCG) was last week calling all contractors to a mass lobby of Parliament, just before the debate took place. The Commons debated the Welfare Reform and Pensions Bill last Wednesday, after Computer Contractor went to press. The Government was expected to use a guillotine motion, a parliamentary device used to force the passing of difficult legislation by imposing time limits on debate. Despite having voted the clauses down last month, members of the House of Lords indicated that they would pass IR35 if it was again discussed by the Commons. This would clear the way for the tax increase's implementation in April 2000. The PCG prepared its own regulatory impact assessment, claiming the Government's version fails to consider loss of tax resulting from freelancers emigrating and from higher compliance costs of the new regime. "The worst case scenario could be a £500m loss of revenue," said spokesperson Susie Hughes. The Group is asking its members to lobby their MPs, and to this end has given them access to a briefing document and questionnaire. "Just because it is out of the Lords, people shouldn't give up," said Hughes. There is uncertainty about what will happen if IR35 clauses are not reinserted into the Welfare Reform and Pensions Bill. Governments normally place alterations to National Insurance rules in legislation dealing with social security, and Labour gave this as the reason for placing the IR35 clauses in this Bill. In theory, however, the whole matter could be dealt with in the annual Finance Bill that follows the Budget in March. Meanwhile, a law firm warned that even if IR35 fails to pass into law before April 2000, the Inland Revenue could enforce its content without legal changes. "The Revenue, alert to industry-wide practices, could just rely on and start enforcing existing law - if someone is effectively an employee, the employer in any event should have been deducting PAYE and NI for the duration of their engagement," wrote the law firm's Kevin Barrow. With IT-specific guidelines on what work will fall under IR35 not due until the new year, contractors are starting to focus on the general guidelines published by the Revenue in leaflet IR35. These outline the differences between self-employed - work that will not be affected by IR35 - and employed, which will be hit (see box). The Conservatives again showed opposition to IR35, with shadow chancellor Francis Maude writing an article on the issue which was posted on the BBC's Web site. "The people hardest hit by this tax are precisely the people who the Government say they want to encourage - entrepreneurs who are prepared to take risks to capitalise on their skills, which are often at the cutting edge of technology," wrote Maude. WEB LINKS HM Treasury www.hm-treasury.gov.uk/ Professional Contractors' Group www.ir35consultation.co.uk VNUnet www.vnunet.com Steve Mathieson's Web site ir35.vnunet.com THE REVENUE'S GUIDANCE ON SELF-EMPLOYMENT If you can answer 'yes' to the following questions, you are probably employed. - Do you yourself have to do the work rather than hire someone else to do it for you? - Can someone tell you at any time what to do or when and how to do it? - Are you paid by the hour, week or month? Can you get overtime pay? - Do you work set hours, or a given number of hours a week or month? - Do you work at the premises of the person you work for, or at a place or places he or she decides? If you can answer 'yes' to the following questions, it will usually mean you are self-employed. - Do you have the final say in how the business is run? - Do you risk your own money in the business? - Are you responsible for meeting the losses as well as taking the profits? - Do you provide the main items of equipment you need to do your job, not just the small tools which many employees provide for themselves? - Are you free to hire other people on your own terms to do the work you have taken on? Do you pay them out of your own pocket? - Do you have to correct unsatisfactory work in your own time and at your own expense? From Inland Revenue leaflet IR56, Employed or self-employed? A guide for tax and National Insurance. This can be downloaded in Adobe Acrobat format from www.inlandrevenue.gov.uk/ir35.
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