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Issue 30; 23 November 1999
Survey | Contractors Move Overseas | Dawn Announces Fast-Track
Visa Scheme | Detailed Analysis of IR 35 | Economist Viewpoint
Survey
As mentioned in the last newsletter we have put up a simple
survey to help us understand better the situation with regards
to the self employment tests. The main point of this is
that it is clear from Parliamentary comments, newspaper
reports, conflicting and disputed figures and letters the
scale of the IR 35 issue. Kevin Miller and myself are attending
discussions with the Revenue shortly so I would ask that
you complete the survey as soon as possible. Individual
responses will be confidential.
Closing date for the survey is Friday 26th November. Link
to Survey
Contractors move overseas
The survey carried out back in April indicated that some
30% of Contractors surveyed would move overseas at the first
opportunity as a result of IR 35. Many are no longer waiting
for IR 35 to take effect. The way the consultation process
has been handled, the frustration that the Government says
one thing, but actually does the opposite and the uncertainty
surrounding planning for the future are causing real anger
and undermining the confidence of a highly-skilled and mobile
workforce in the future of the UK. The undoubted effect
will be to drive many of the most highly educated, talented
and hard working members of our society, overseas. This
anger is typified in a letter
sent by a contractor to their local MP.
Dawn announces fast track Visa scheme
In apparent recognition of the damage that will be caused
by IR 35, as spelt out so cogently in the above letter,
Dawn Primarolo has made the following statement as part
of an open letter:
"However this government recognises that there is a
more general skills shortage in engineering and in particular
the IT sector. This is inflating wage costs and harming
the competitiveness of British industry. The government
has put in place training initiatives and is investing in
higher education but it will take some time to reap the
benefits of this investment. To address current demands
the Home Secretary is looking at a fast track visa scheme
for qualified applicants from Eastern Europe, Africa and
India. We recognise that recruiting in these areas is difficult,
the Foreign Office is looking at ways for British embassies
and consulates to assist in this process. This will be in
partnership and funded by industry and we are talking with
leading UK recruitment specialists to help in this process."
In a separate News article shows that Peter Hain (Foreign
Office) has just returned from Bangalore in India where,
it is reported, he discussed trade cooperation between India
& UK and in particular the prospects for cooperation in
the IT sector which he reports is advanced and can help
Britain.
This is an interesting development. The RIA published by
the Revenue took no account of loss in tax revenues caused
by movement of skilled personnel overseas. They ignored
the PCG's alternative RIA which considered the possible
impact if only 20% moved overseas. (The result; a net loss
of some 700 million pounds) You would have thought that
by now Ministers would be asking some serious questions
of the Civil Servants briefing them. "Why do we need to
fast track visas if you do not consider IR 35 will cause
loss of skilled workers overseas?" would be a starting point.
Or "How about Peter Hain visiting many of the petrochemical
and offshore Contractors at present in "disguised" unemployment
(Directors of Ltd Companies cannot claim unemployment benefit,
hence the term "disguised" unemployment), and see how the
Government could help these small businesses retrain to
take advantage of the knowledge based economy" would be
a helpful suggestion and a positive way of utilising existing
resources within the economy.
Detailed analysis of IR 35
Gareth Williams, a PCG committee member, has carried out
an In-depth
analysis of IR 35.
He makes some very salient points. A key conclusion is
"that the independent consultancy (failing the self employment
tests) will be more heavily taxed than any other way of
providing an equivalent service. It would be cheaper for
the consultant to work for any company but his own. It is
unclear why the Government should seek to tax independent
consultants in this punitive way, or what they expect to
achieve by it."
This is apparently in contradiction to the viewpoint from
the Agency and Contractors Accountants. Many of them seem
to have given up the fight and are briefing Contractors
that if they fail the self employment test they would still
be advised to continue to trade through their Ltd Company.
This may ensure that the Agency can reduce "employment"
liabilities and the Contractor Accountants continue to charge
fees, but from Gareth's analysis the only reason you would
want to continue trading through your Ltd Company is if
you pass the self employment tests.
Contractors Accountants may work closely with Agents, but
it is becoming clear that if we cannot pass the self employment
tests then there seems little point in continuing to trade
as a Ltd Company. As such, both Agents who cannot provide
this service and Contractors Accountants, will find themselves
losing significant business.
Economist viewpoint
In a reply to one of our members Professor Patrick Minford,
a respected economist, wrote:- "Yes, IR35 is an appalling
intrusion into private contract. Yes, it will drive people
abroad. The world is changing fast and up to now Britain
has done quite well- but this government is a menace. Under
the cloak of fine words about free markets and business-friendliness,
it has done a series of things that are potentially highly
damaging; on savings, on tax, on Tax Credits, and now on
the labour market and IR35. Because the mass of our people
know nothing about such subtleties these things are 'stealing
through'. Experience shows that at some point people wake
up and the scales fall from their eyes-then, feeling duped,
they react sharply. We just have to hope that this happens
before the damage has gone too far."
Kind regards
Andy White
Chairman, PCG
e: [email protected]
Membership is invited from Contractors in the Knowledge
based sector. Associate membership is also available to
Clients, Agents, Accountants and representative bodies.You
can join the PCG (use the online joining form) at https://www.pcgroup.org.uk
We now can accept credit card payment on line via our secure
server. This will provide immediate access to the members
area and the confidential reports commisioned by the PCG.
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