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IR35 threatens to blow up into election issue

Tories say they'll abolish it; Labour says all's well

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The IR35 legislation that increases the tax paid by IT consultants may become an election issue thanks to its inclusion in the Conservative Party's manifesto.

The manifesto reads: "Conservatives will repeal the tax on IT consultants, the notorious IR35, which has driven away from Britain some of our most productive workers. We will replace it with targeted anti-avoidance measures."

E-minister Patricia Hewitt has already responded to the manifesto claim that people are leaving the country by saying the opposite. "I think a lot of people who thought that IR35 would hit them are pleasantly surprised to find that they really are self-employed - in the eyes of officials as well as themselves," she wrote in a chatroom. "Last year, everyone was saying IR35 would cause thousands of IT professionals to flee the country. It just hasn't happened - perhaps because Germany, Australia, the US and many other countries are also taking the same step to have fairness in the tax system."

What Patricia fails to mention of course is the High Court ruling that the government had failed to enforce the legislation properly and its implementation needs to be revisited. The issue is far from over and while the government is attempting to come up with a new method of applying it, the Tories will use the issue to inflict maximum political damage.

Ms Hewitt's claims that no one is leaving the country are also suspect. But we are unlikely to have any useful statistics before the election is over. We would also welcome a further explanation as to what she means exactly in reference to other countries producing legislation.

Apart from IR35, however, there is not a single mention of the IT industry or the Internet in the Tories' manifesto - something that may even be newsworthy in itself. We look forward to reviewing the LibDems manifesto tomorrow and Labour's much-awaited manifesto some time this week. ®

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