IT contractors are seeking jobs overseas to avoid the Government's IR35 tax crackdown, it was claimed this week, raising fears that employers may be forced to pay more for temporary staff.
The Professional Contractors Group, a body set up to campaign against the crackdown, said there was growing evidence that freelance IT staff are seeking work abroad.
"Contractors are not going to take this lying down. They are going to fight IR35 in the courts or they are going to uproot and go abroad," said David Ramsden, political director of the Professional Contractors Group.
The group is seeking advice from the US embassy for members interested in working in the US, which has relaxed immigration restrictions for IT workers. But Holland, which gives generous tax relief for IT staff, is also proving popular.
It predicts that between 20% and 30% of the UK's contractors could go overseas
Philip Virgo, strategic adviser to the Institute for the Management of Information Systems, said IR35 would encourage contractors to sign up as employees with agencies in countries with more lenient tax regimes, such as Belgium or Luxembourg.
Although offshore agencies will continue to supply employers in the UK with IT staff, they are likely to charge higher prices, he said.
The Government is expected to publish revised IR35 proposals, which will require IT contractors to pay a higher proportion of national insurance, this month.
The Government made it clear last year that hundreds of millions of pounds were at stake over IR35 and said it would not back down despite pressure from contractors. The Inland Revenue believes that some contractors are exploiting tax laws to avoid National Insurance