Clause 38 - Provision of services through an intermediary: minor amendments
Finance Bill
5:30 pm
Mr Howard Flight (Arundel and South Downs, Conservative)
I beg to move amendment No. 14, in page 24, line 35, leave out from 'payment)' to end of line 28 on page 25 and insert--
'in step Three of paragraph 7 after ''by the worker out of those emoluments'' add ''and deduct also all allowances and the effect of all reliefs to which the worker would be entitled were he the employee of the client in employment assessable to income tax under Schedule E''.'.
Clause 38 applies to traders who have been penalised by the measure known as IR35, which the Government introduced in 2000. Among other things, this had the effect of taxing independent contractors as if they were employees and introduced a rather complicated method of calculating the tax due on their supposed salaries.
The clause somewhat grudgingly corrects some aspects of what was considered to be overkill in the IR35 approach. IR35 targets are given two exemptions that are available to ordinary full-time employees: mileage allowance and partnership expenses. We are pleased to see the provision, which is fair and reasonable, but the amendment would do the correct thing and provide automatic extension of all ordinary employees' tax benefits to IR35 targets. If IR35 individuals are to be treated as though they were employed, they should be covered by the same wider arrangements. Relevant areas include qualifying child care payments and personal incident expenses. The Government have been over-obsessed in principle with the IR35 territory and the amendment offers an opportunity to create a level playing field and provide IR35 individuals with the standard exemptions available to employed individuals.