IT industry left fuming over IR35 revisions

The government's revised IR35 plans for the taxation of IT contractors have led to a hail of criticism from the British IT industry.

After the end of a controversial consultation period (http://www.silicon.com/a32933 ), groups are citing different research to show what will happen to the UK skills base.

Professor John Burton, an economist from the University of Westminster, has written a highly critical report on the subject. It draws on a survey by the Professional Contractors Group and is published by right-wing think tank the Adam Smith Institute.

Burton told Silicon.com: "What [the government] has got is a very disjointed policy. On the one hand they're talking about promoting the information society. On the other hand I think this will cause a lot of people working in the IT sector to work abroad."

While one person service companies in various sectors will be affected, workers in IT, engineering and the media will be most affected as professions such as law and accountancy usually require country-specific qualifications.

The 3 sixty group - which has criticised the government over its IR35 proposals - called the amended legislation "a triumph of double speak that Orwell would have admired".

However, Giant Group, which handles tax matters for contractors, has played down developments, despite its own research showing that 55 per cent of contractors have contemplated overseas employment - 30 per cent directly because of IR35.

Paul Daniels, head of the tax department at Giant, said: "I don't like IR35, and I certainly don't like our clients paying more tax, but the industry will recover from this. We will work with the Inland Revenue to make sure the new rules are as unambiguous as possible."

Professor Burton added that the government's revised plans to stop tax avoidance - pushed through by Paymaster General, Dawn Primarolo - are arithmetically wrong.

"Originally they said the move would raise about £475m, and now, with a smaller group of workers affected, they're still quoting £475m," he said. "It just doesn't add up."