PCG urges Chancellor to repeal IR35 and remove barriers to freelancing in Budget ‘09

7 April 2009: PCG, which represents the UK’s freelancers, has made its submission to this year’s Budget, calling on the Chancellor “not to let the ‘tax tail’ wag the ‘business dog’”.
PCG chairman, Chris Bryce, commented: “Freelancers have an important part to play in the economic recovery of the United Kingdom. The flexibility, skill, and knowledge they provide will be instrumental in meeting the needs of businesses, generating future wealth for the economy. Therefore the tax and regulatory burdens upon them must be removed.

“The largest single impediment to freelance working in the UK, the Intermediaries Legislation (“IR35”) remains in force. In the interests of economic recovery, we advise the chancellor to repeal it as a matter of urgency.”

PCG believes that IR35 creates massive and crippling uncertainty for freelancers who are required to self assess their tax liability with unclear and unfair rules. There is no evidence that this unworkable legislation raises any revenue for the Exchequer, and instead it limits labour market flexibility.

PCG’s Budget submission also calls for the abolition of the controversial “S44-7” tax rules, and for the reversal of the decision to remove the VAT staff hiring concession. S44-7 makes it impossible in practice for agencies to pay freelancers gross unless they have a corporate form, thus limiting the choice of legal form available to them.

Mr Bryce concluded: “We urge the Chancellor to reconsider his stated intention to remove the VAT staff hiring concession. Withdrawing a long standing tax break on hiring temporary staff at a time of rising unemployment does not make sense.

“These are dire economic times across all sectors, which is why the Chancellor will no doubt be doing all he can to help businesses. Helping freelancers should be an important part of this effort. We hope the Chancellor therefore addresses the issues we raise in his Budget, and meets the needs of the UK’s 1.4 million freelance workers.”



1. PCG’s budget submission can be found online at http://www.pcg.org.uk/

2. IR35 is a complex tax measure that imposes a higher tax and NICs bill on freelancers than employees, if their relationship with their client is one of “disguised employment”. In practice, self-assessing IR35 status is impossible to do with any confidence, and the complexity of the measure has given the Inland Revenue, and latterly HMRC, licence to mount aggressive and unjustified investigations into freelancers who have done nothing wrong.

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