Coalition offers IR35 review sweetener

Yesterday, the government published its full programme and said that they would undertake a review of all taxation for small businesses, including limited company contractors, with a view to replacing IR35 with a simpler system.

The new plan will prevent tax avoidance but should ensure that freelances will not be burdened down with undue administrative work.

The PCG is very pleased with the news as they have been actively campaigning for the abolition of IR35.

There are currently around 1.4 million freelancers and contractors in the UK and the IR35 rules have caused many of them enormous headaches. But this unpopular tax did not raise much revenue for HMRC. Out of 1,500 IR35 cases that the PCG was involved with, only 10 were found to owe additional tax.

Prior to the election, the PCG had a number of meetings with both the Tories and the Lib Dems to discuss IR35. PCG Chairman, Chris Bryce, said he was delighted that the parties had both listened to their message and that action was going to be taken. He added that the group would continue to work with the coalition to ensure a fair working environment for freelancers.

As from April 2011 the personal allowance for income tax will rise and the government has also announced that it plans to reform corporation tax.

In other good news for the self-employed, the Lib Dem/Tory coalition has said it hopes to award 25% of government contracts to SMEs.

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