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Comment 2nd July 2010

IR35 views contract workers as 'disguised employees' and makes them subject to the same tax law as individual PAYE employees rather than companies

I would like to see one or the other.  Either treat contractors as full employees with the assosciated benefits and protections or as separate companies allowed to conduct their business as most other companies.

Why does this matter?

The labour government managed to all but destroy the UK Contract IT industry with the introduction of IR35 which views contractors as "disguised employees".  They are thus subject to the same tax & expenses legislation as a PAYE employee – but do not benefit from much of the associated employment law which protects PAYE employees.  You pay tax as if you are an employee of your client – but you do not get any of the other benefits such as holiday or sick pay, and the client can terminate your contract with no notice.  Also, since you are 'self employed' you do not benefit from any kind of suplementary benefits from the state for 6 months after your last employment.

The tax gain which the government hoped for from this legislation did not materialise and may actually have fallen since most of the work previously conducted by UK firms has been subcontracted abroad.

There is an oportunity to bring much of the overseas contract work back to the UK as many companies have found it more expensive in the long run (similar to overseas call centres). 

Amending IR35 to remove the uncertainty over whether a worker falls under it's remit would help re-build an important industry sector. 

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