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Yes Minister

This is the text of the letter that the Treasury are sending out in answer to MPs questions about IR35. There are a lot of copies of this letter around !

Dear constituents MP

Thank you for your letter of date, enclosing correspondance from your constituent constituents name about the provision of personal services. I am replying as Minister responsible.

We are committed to achieving a tax system under which everyone pays their fair share. Under existing rules it is possible for a client to take on a worker through an intermediary (such as a service company) in such a way that an engagement which would otherwise be employment is not treated as such. Such arrangements can provide considerable scope for reducing or deferring tax liabilities and reducing or eliminating employers National Insurance contributions.

We are active in our support of entrepreneurship. The purpose of the proposed new rules is not to undermine entrepreneurial endeavour - indeed, these changes allow for support to be better targeted at entrepreneurs. There is certainly no question of outlawing the use of intermediaries. The purpose of the proposed new rules is simply to provise a mechanism for looking through any intermediaries in a contracting chain to the characteristics of the underlying relationship betwen the worker and the client. Where that underlying relationship is found to have the essential characteristics of employment, we propose that the worker actually be treated as an employee for the purposes of tax and National Insurance.

The Chancellor announced these proposals on Budget Day to give advance notice of the changes and to allow time for the Inland Revenue to discuss the practical application of the new rules with representative bodies. This process is now being taken forward.

I have passed a copy of consituents name letter to the Inland Revenue and have asked them to take into account the points raised. I have also asked them to forward copies of the material which they have been distributing directly to the representative bodies with whom they are working. Detailed guidance on the new rules will be published once the rules have been finalised.

Yours etc