House of Lords approves Bill

The Welfare Reforms and Pensions Bill is likely to become law despite coming under heavy criticism in the House of Lords. The Bill - which contains IR35 proposals for changes to tax rules for one-man service companies - will proceed to the committee stage where it can be amended.

Experts have warned that the law could have a dangerous impact on the IT industry by making IT contractors pay the same levels of tax and national insurance as fulltime staff - a cost that is likely to be passed on to the end user.

Industry lobbyists say they will step up their campaign to have the Bill amended at the next stage, which is expected to take place in the next few weeks. A spokeswoman for the PCG said: "We will continue to assist the Inland Revenue as much as possible to make these proposals workable."

The government has already come under heavy criticism for introducing the proposals through the backdoor without proper debate. The first full debate between the Inland Revenue and industry bodies took place yesterday morning - only hours before the House of Lords was due to discuss the proposals.

But the proposals took a further bashing as Lord Higgins forcefully made the point that the proposals had been put forward in the most extraordinary way. He accused the government of spin-doctoring, and introducing the legislation at the last minute so a clear idea of who would be affected was not able to be obtained.

The government also faces fresh criticism that its regulatory impact assessment, finding that 66,000 small companies will go out of business, was a serious underestimate and only took account of those that would have to pay national insurance.