Paymaster General Dawn Primarolo is convinced that the IR35 proposals will force more permies into the contracting world.
In a recent letter to the FT Primarolo said, "Under the current legislation, some employees may be persuaded, against their own interest, to give up their rights as employees and set up personal service companies in order to benefit from substantial savings on tax and National Insurance contributions. While there are savings to be made for both employer and employee by avoiding tax and NI contribution in this way, it is not surprising that this happens."
"Our proposals will take away these savings. It is unlikely that employees will be tempted to give up their employee status if they would be no better off. We see no reason to expect this practice to continue once the new legislation is in force."
As Mr C.B Smith replies to her letter in the FT, "Dawn Primarolo demonstrates her government's lack of understanding about how the labour market works in the UK IT industry."