Last week the Revenue released a watered-down version of its proposals to stop almost £500m worth of tax avoidance by contract workers following an extensive campaign for curbed rules. The document - IR35 - has withdrawn both the unwieldy certification scheme and the narrow control test. The proposals now involve less red tape and are more closely targeted. The controversial certification system which would burden companies with working out the employment status of workers has been dropped and will be placed on personal services companies. Anne Redston, chairman of the Chartered Institute of Taxation's personal taxes sub-committee and an Ernst & Young tax partner, welcomed the curbed plans but warned of potential problems. 'Some partnerships are still included and this will cause a number of practical difficulties. Also personal services companies are expected to understand the complicated rules for distinguishing between employment and self-employment for tax purposes.' While the fairer rules and reduced burdens on business were welcomed, some practitioners hoped for further negotiations. John Whiting, tax partner at PricewaterhouseCoopers, said: 'I hope we will get further discussions on how it is going to work. The next stage is working out how the mundane mechanics will work.' A Revenue spokeswoman said: 'We will continue to work with the representative bodies to develop detailed guidance for publication before the rules come into effect in April 2000.' Paymaster General Dawn Primarolo said the changes would target tax avoidance and did not prevent the use of intermediaries where they provided non-tax advantages. The rules take effect in April 2000 and are expected to net £475m in tax and NI contributions in 2000-2001 and £300m a year after that.
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