Shadow Chancellor leads rallying cry against IR35

Shadow Chancellor Francis Maude today hosted a meeting of the Professional Contractors Group (PCG) at the Houses of Parliament to rally support for changes to proposed IR35 legislation, and called the clauses "wretched" and "a disaster for entrepreneurs".

The legislation is supposed to prevent contractors from exploiting what the government alleges is a legal loophole whereby they can declare themselves one-person service companies to avoid paying full tax levels. The amendments are part of the government's Welfare Reform and Pensions Bill which is having its second Commons reading today.

The government earlier backed down on a threat to put the Bill through on a guillotine motion, which would have forced MPs to vote this evening whether the debate was completed or not.

The government has been fiercely criticised for the manner in which IR35 has been put forward, with the industry complaining of a lack of consultation and the Conservatives branding it a "stealth tax" that would be better introduced as part of a finance Bill.

Speaking exclusively to Silicon.com, Shadow Chancellor Maude said: "The Conservative Party has consistently argued for allowing the self-employed to operate without being harassed by the Inland Revenue at every turn. The growth in technology places an ever greater obligation for us to create a situation where people - who are crucial to the economy - can remain in business."

Andy White, chairman of the PCG, labelled the changes a "smash-and-grab raid" on the enterprise economy. The PCG claims that far from raising the estimated £475m for the Treasury, the legislation will cost the Exchequer £705m and close down up to 150,000 small businesses.

During Prime Minister's Question Time in the Commons today, William Hague, leader of the opposition, asked Prime Minister Tony Blair to reconsider the legislation.

Blair reaffirmed his support for the measures and stated it was right that everyone should pay tax on the same basis; he denied allegations it would drive IT contractors out of the country.