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Letwin unveils £300m plan to scrap IR35

IR35 could be scrapped under a Tory plan to lift the burden of small business taxation for self-employed professionals and IT contractors.

Oliver Letwin, Shadow Chancellor, has estimated that abolishing one of the most troublesome tax rules would deliver a loss to the Treasury of £300m in annual revenue.

But Mr Letwin said his raft of proposals, which include reform to S660A, would not only remove the complexities of IR35 but also help foster greater entrepreneurial culture in the UK.

As part of the fifth tax paper unveiled by the Tories, he explained that many contractors and consultants have fled abroad simply to avoid tough tax obligations.

By cutting the four-year old rule of IR35, the hope is that UK professionals will now want to return home to take advantage of less onerous tax conditions.

Mr Letwin's pledge to abolish IR35 coincides with his desire to cut non-corporate distribution rate at a cost of up to £340m. He also said he wants to address the ambiguity of S660A, governing 'husband and wife' companies.

His tax timetable even makes room for an abolishment of inheritance tax, at an estimated annual loss to the government of £2.9 billion.

Yet so far, there is no solid commitment as to what taxes the Conservatives would reform or abolish, should they take office after the general election.

The Daily Telegraph reports there will be no further detail on exactly what taxes are to be scrutinised until Gordon Brown delivers his Budget, later in March.

Michael Howard, Conservative leader, has said it is unrealistic that any changes to the tax regime could be made in one swift unveiling.

"What we are doing is showing the options available to a government determined to cut tax. We are spelling out the cost of each of these options."

Jan 5, 2005
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