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Promise to review IR35 is ‘welcome’

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An organisation representing contractors has welcomed the government’s decision to review the IR35 tax system.

The rules were introduced in an effort to clarify the tax distinction between employees and contractors.

However, the regime has been criticised as complicated and inefficient for both taxpayers and HM Revenue and Customs (HMRC).

As part of its full administrative programme, the new coalition government has pledged to review the regulations and to replace them with a simpler system that prevents tax avoidance but does not place burdens or uncertainty on the self-employed, or restrict labour market flexibility.

John Brazier, managing director of the Professional Contractors’ Group, said: “We are delighted that the new coalition government made this commitment to review IR35 as a priority only days after taking power.

“For the last 10 years PCG has campaigned for honesty and fairness when dealing with the UK’s 1.4 million contractors and freelance workers. With the end of the iniquitous IR35 we have the opportunity to achieve fairness.

“The cost in distress has been high, but the revenue for HMRC has been minimal. Just look at the figures; they show that of the circa 1,500 IR35 cases PCG was involved with, HMRC has proved additional tax was owed in around 10.”

Chris Bryce, chairman of the PCG, added: “The PCG voice will still be heard working with and advising Government where and when we are needed on behalf of PCG’s 20,000 members. Freelancing is a growing and valuable part of the UK economy.”