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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.

The House of Commons site with Finance Bill details