What is the Finance Bill?
Only the House of Commons can raise money
by way of taxes and the Government, therefore, has to set
its Budget proposals for raising taxes into a Finance Bill.
While tax changes and tax continuations can come into force
with immediate effect new taxes have to be ratified through
Parliament to have permanent effect. The Finance Bill has
to pass through various stages before it becomes law as
the Finance Act and it can be amended at the Committee stage.
However, Finance Bills cannot be changed in the Lords. The
Bill will become final in late July and the provisions relating
to “IR 35” will be effective from 6 April 2000.
How does it affect me?
The Government’s proposals for new legislation
governing the provisions of services via intermediaries,
known as “IR35”, affect both National Insurance and income
tax legislation. National Insurance legislation does not
have to be enacted via a Finance Act and legislation has
already been enacted, as a statutory instrument – No 727
Social Security, The Social Security Contributions [Intermediaries]
Regulations 2000, which was passed on 13 March 2000. This
puts into place the National Insurance elements of the proposals.
However, the income tax aspects still have to be passed
as part of the Finance Bill. They are covered in clause
59 and Schedule
12 of the Bill.
What is the PCG doing?
A draft of the legislation was originally
published in February and PCG raised various issues with
the Revenue at that stage. As a result certain matters have
been clarified or changed. For example, the Bill now clarifies
that if the client and the intermediary are associated by
virtue of being under the control of the worker, alone or
in combination with others, then the legislation does not
apply. The situation where the worker or the client are
not resident in the UK for tax purposes or if the work is
carried out outside the UK has also been clarified. It is
now confirmed that the worker would not be caught by IR
35 if they would not have been taxable in the UK had they
been an employee of the client.
Now the Bill has been issued PCG is monitoring
its progress though Parliament. It is briefing MP’s on the
key issues, while PCG members are writing to MP’s to try
and influence their debate and their decisions. It is has
also taken legal advice on whether the legislation is contrary
to European Law. A leading QC has indicated that PCG has
a good case and our lawyers are working with the QC to put
together sufficient evidence to convince a High Court Judge
that there are sufficient grounds for a Judicial Review
of the legislation.
What Can I Do?
PCG helps its members keep abreast of
developments and target their MP’s with letters setting
out key issues. By keeping up pressure on MP’s by way of
lobbying and letters we can ensure that the Government with
its large Parliamentary majority, nevertheless recognises
the strength of feeling on IR 35 and the potential damage
IR 35 can do to its image and reputation.