HL Deb 12 April 2000 vol 612 cc47-8WA
The Earl of Northesk

asked Her Majesty's Government:

Whether the e-czar has expressed any views as to the effect and practicality of the Government's IR35 provisions (on the treatment for tax and National Insurance purposes of the provision of services through intermediaries such as personal service companies); if so, what those views are; and whether they are being taken into account by Ministers in the determination of policy in this area. [HL1933]

Lord McIntosh of Haringey

Mr Alex Allan has received many representations on this issue and has posted his views on the Discussion Forum area of his website—www.e-envoy.gov.uk. He has made it clear that he supports the Government's policy of stopping unfair avoidance of tax and National Insurance contributions.

The Earl of Northesk

asked Her Majesty's Government:

What effect the Government's IR35 provisions have had on one-person personal service companies in knowledge-based industries, particularly in terms of such individuals electing which country's tax regime they will be subject to. [HL1934]

Lord McIntosh of Haringey

We have no reason to believe that there has been a significant change of behaviour as a result of the new provisions for personal service providers, which simply ensure that everyone pays income tax and National Insurance contributions on a fair and reasonable basis.

The Earl of Northesk

asked Her Majesty's Government:

What criteria the Inland Revenue will apply in determining exemptions from their IR35 provisions. [HL1935]

Lord McIntosh of Haringey

The new legislation will be applied only to income generated from activities which carry the normal characteristics of employment. The same case law tests as to whether someone is employed or self-employed for tax and National Insurance purposes will apply to everyone, whether they work through a service company or not.

The criteria which determine employment status for tax and National Insurance purposes are based on a long history of case law. An overview of these criteria is available in the Inland Revenue February 2000 Tax Bulletin, or on the Inland Revenue website at www.inlandrevenue.gov.uk/ir35.

The Earl of Northesk

asked Her Majesty's Government:

Whether the IR35 provisions are consistent with the Chancellor's determination to establish the United Kingdom as a knowledge-based economy. [HL1936]

Lord McIntosh of Haringey

People in this country pay tax and National Insurance contributions depending on whether they are employed or self-employed. We believe that these rules should apply equally to everyone: it is not fair that it should be possible to avoid them simply by setting up a one-man company.

We can only support the people who are genuinely self-employed, who take risks and create employment, if we make sure that tax measures designed to encourage enterprise do not go also to people who are really no different from employees. By tackling avoidance activity, we will be able to target our support for small businesses more effectively, whether in the knowledge-based sector or elsewhere.