Letter: Outmoded tax rules

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The Independent Culture
Sir: Hamish McRae's excellent article "Sleepwalking into the future" (19 August), focusing on the way working patterns are changing - and the fact that government and agencies are well behind the changing patterns - deserves careful study, not least in the corridors of power.

Nowhere is there a better illustration of the way the legislature seems to be well behind reality than with the Inland Revenue's attack on Personal Service Companies (PSCs). Announced in the Budget this year in "IR35" and flagged as a crackdown on tax avoiders, the move completely failed to understand that the vast majority of PSCs are there as practical devices to help those who have struck out on their own to manage their affairs efficiently and effectively in this modern era.

Certainly there are abuses in this area, as in so many fields. But to have IR35 attack all PSCs without any attempt carefully to target the abusers runs the real risk of hampering the legitimate development of an important aspect of the UK's workforce - its flexibility. This flexibility has been an important part of the way the UK's economy has adapted and expanded in recent years, in contrast to many of our neighbours.

Tax rules should not hinder this and it is to be hoped that holidaying Ministers are thinking carefully about the widespread chorus of disapproval that has been voiced in opposition to the IR35 proposals. We need tax rules that help and look forward, not drag everyone back to an increasingly outmoded model amidst a welter of additional costs and bureaucracy.


Partner, PricewaterhouseCoopers

London EC4