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Lib Dem policy paper calls for IR35 to be suspended
Posted Aug 30, 2011
A new Liberal Democrat IT policy paper, to be debated at the forthcoming party conference, has called for IR35 to be suspended.
Policy paper 101, 'Preparing the Ground: Stimulating Growth in the Digital Economy', was prepared by the Lib Dem IT working group, chaired by Julian Huppert MP.
The paper covers a lot of areas, from cloud computing to bringing copyright laws up-to-date with recent advancements in technology. It also outlines the party's views on IR35, which 'has not served the needs or the interests of IT contractors'.
Following the publication of the Office of Tax Simplification's interim report on small business taxation in March 2011, the Chancellor opted to keep the IR35 rules in place, as the potential tax losses to the Treasury were thought to be too great to justify abolition.
The other options offered by the OTS report included suspending IR35 with a view to a permanent suspension at a later date, and introducing a new business test to make it easier to determine whether or not IR35 should be applied.
Although a possible long-term merger of income tax and National Insurance was mentioned in the OTS report and subsequently at Budget 2011, the paper acknowledges that this may be a 'very difficult long-term endeavour'. Such a merger of tax systems would make the scrapping of IR35 a much simpler task, however there is no guarantee that it would ever come to fruition.
The paper recognises that there is no obvious alternative to the current IR35 regime, however it favours the suspension of IR35 in order to further examine what the impact would be of permanent abolition.
You can download the paper here (PDF).
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