IR35: IT contractors to benefit from tax law axe

Legislation may face the chop under new government

The Liberal-Conservative coalition government has pledged to review and possibly scrap a tax law that forces onerous administrative pressure onto freelance IT contractors.

The coalition's full programme for government, published last week, declares it will "review" the IR35 tax legislation and "seek to replace it with simpler measures".

The IR35 legislation was introduced in 2000 to try and stop freelance contractors from setting themselves up as a private company solely for the purpose of qualifying for tax exemptions.

However, the legislation has been heavily criticised by contract workers who claim that complying with the complex law places an unfair administrative burden on contractors.

The coalition document said it would seek to replace IR35 with measures that "prevent tax avoidance but do not place undue administrative burdens or uncertainty on the self employed, or restrict labour market flexibility".

The IR35 tax law could be axed in order to take the strain off IT contractors
(Photo credit: Shutterstock)

The announcement was welcomed by John Brazier, managing director of PCG, the group representing freelance contractors in the UK.

He said in a statement that IR35 "has caused great heartache to many people. The cost in distress has been high but the revenue for HMRC has been minimal.

"Just look at the figures; they show that of the circa 1,500 IR35 cases PCG was involved with, HMRC has proved additional tax was owed in around 10."