IR35: the govt's viewpoint

Civil servant behind legislation speaks her mind

By Kieren McCarthy, 27th March 2001

Magic Quadrant for Enterprise Backup/Recovery

The civil servant behind the controversial IR35 tax legislation has spoken at length with contractor group Shout99. In the interview Sarah Walker is unrepentant regarding the legislation and is sure that it will be upheld as legal. Sarah was the architect of IR35. She is soon to move to the Inland Revenue's Pensions Department.

An interview with Shout99 was initially refused but Ms Walker then agreed to one between the end of the recent judicial review into the legislation and the judge's decision, which will be announced on Monday 2 April.

In the interview, Ms Walker explains the thinking behind IR35, aims to justify its introduction and talks through the possible consequences of the judicial review.

In contrast to the PCG's claims, Ms Walker says that while some contractors have left the country to work elsewhere, it is not in "substantial numbers". She admits that the Revenue does not have any figures on how many people have left but claims that people would have left anyway and it was not a result of simply IR35 legislation. The UK tax system is in fact favourable to other countries, she said.

"We don't have figures ourselves on leavers. I don't think it would be possible for anybody to identify numbers of people who had either left the country or come to this country or not come to this country purely because of IR35. People in IT move from one country to another very frequently anyway- there will have been thousands of people over the last year who would, whether IR35 had been in place or not, have decided for very good career or commercial reasons that they wanted to go and spend some time abroad."

Regarding possible changes in IR35, she is unswayed. "Ministers have said that they are not prepared to amend the legislation... they have defended it very strongly in the judicial review and elsewhere and they don't see any need for any amendment." However, she says that the government is prepared to talk to the PCG, and even suggests that the PCG is happy with the consultation exercise that it carried out.

What if the judge rules against IR35? "If we lose the case, it will depend on the terms of the judgment. If the effect of the judgment is that the scope of European Law is so much wider than we were expecting it to be - that it prevents the Government from taking this kind of action, then I think we would expect to appeal - but clearly it depends on the terms of the judgment."

And its confidence that it will win the case? "We're just as confident as we were before the case, we and ministers are confident that this is fair and proportionate and consistent with all of our European obligations."

So that's the government's stance. We shall what happens next Monday. ®