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| CURRENT SECTION :: IR35 / IR591 | UK's most visited IT Contractor Site - 250k unique visitors March 2008 |
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CUK have today been given information from a source close to the Treasury that IR35 is set to be abolished with effect from 6th April 2004. This highly criticised tax was introduced in 1999 to counter what the Government argued was a significant loss of tax due to the common practice of “one man” Limited Companies paying small salaries and high dividends, thereby saving significant sums of National Insurance. Since its inception there have been a number of schemes set up which purport to avoid the measures, one of which was the highly publicised collapse of Dignatio, leading to hundreds of contractors losing money. The pre budget report in December 2003 gave hints that a new regime was to be announced in the 2004 budget which has now become known as IR591. Details can be found here . This new regime we have been told is set to replace the widely despised and ill fated IR35 in April 2004. From the Government's point of view the collection cost for IR591 will be far lower than IR35 because there is no complicated and subjective criteria judging who must pay. Any Close Company paying dividends will be subject to the new regime. The actual tax collected will be significantly higher also due to the blanker nature of the new measures. IR35 targetted only knowledge based workers whereas IR591 looks set to target all Close Companies. What about the contractors point of view? Well, there will be certainty as to how much tax and NI is to be paid, and no need to worry about an IR35 “knock on the door” from the Revenue. Whilst those contractors not currently caught by IR35 will be financially worse off, those currently caught by IR35 will be significantly better off, so on the whole it would appear that IR591 will be a marked improvement on IR35. One group we must spare a thought for are those Companies that make a living from IR35. The various websites, insurance products, questionable schemes and the like, will, it seems, also cease to exist this year. Jan 16, 2004 Email this article Printer friendly page Previous Page
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