A year in review: IR35 and one-person service companies

The UK government's IR35 legislation has been a thorn in the side of the UK's IT contractors' all year.

Introduced in April's budget, the legislation aimed 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 levels of tax.

The legislation has had to contend with strong opposition from MPs and industry and contractor representatives. Those who opposed the legislation finally saw victory when the House of Lords rejected the IR35 clause in October.

The UK government was accused of being unfair when it came to discussing the implications of the legislation. In September, officials invited EDS, the IT services group, to a meeting where IR35 proposals where discussed.

David Ramsden, director of the Professional Contractors Group (PCG) said: "The government has a duty to talk to all interested people. The PCG is the only group that is looking after the contractors interests - EDS has its own agenda - I have no problem with the government talking to EDS but they have to talk to us as well".

The government is still determined to see the legislation through despite warnings that it could result in the closure of thousands of UK small businesses and the drain of skills to other countries.

Although the government reintroduced the legislation and will become law in April 2000 the fight isn't over yet. The PCG and other lobbyists hope to refine the government definition of which limited companies would be subjected to these proposals.