The Professional Contractors Group (PCG) has called on the Government to "join up" its thinking on IR35 after immigration minister Barbara Roche recognised there was an "international scramble" to attract top IT talent, on the same day that the Prime Minister published the e-envoy's annual report, with a commitment to monitor the effects of IR35.
According to the PCG, a representative body for 10,000 contractors, the Home Office and Treasury departments appear at cross-purposes. While one proposes easing immigration laws to entice IT workers from abroad, the other is driving British contractors from the country with its IR35 tax rules. However, the organisation believes that Roche's speech and the e-envoy's report represent "two significant developments".
"The Home Office minister has recognised that there is a world-wide shortage of IT experts, and it is only a small step for her to realise that other countries are looking more attractive than the UK to highly-skilled IT contractors because of the unfair and restrictive IR35 measure," comments PCG chairman, Gareth Williams. "Hundreds of our members have already left the UK. This is just the tip of the ice-berg - it will only get worse."
Perhaps more encouraging for the IT entrepreneur however, says the PCG, is the UK Online annual report, written by e-envoy Alex Allan and e-minister Patricia Hewitt.
In a section titled 'Listening to Industry', the report acknowledges the concern IR35 has raised in the IT and e-commerce sectors, but says the legislation aims to tax all workers on a "fair" basis.
However, the report adds: "As with all legislation, the Government will monitor the effects of the IR35 changes to ensure that they achieve their objectives and do not have unexpected harmful effects on genuine business activities. This will include investigating any effect on the labour market in industries where use of service companies is common."
Read more on IT for small and medium-sized enterprises (SME)
The High Court has ruled against an IT consultant who was fighting a £99,000 tax demand for work he completed on behalf of motoring organisation the AA.