Treasury on the defensive over IR35

The UK Treasury has denied that its IR35 crackdown on self-employment has resulted in IT contractors moving abroad.

Paymaster General Dawn Primarolo told the House of Commons: "There is no evidence that a significant number of IT consultants are moving overseas as a result of this legislation."

He warned that any contractors who go to Norway, Belgium, Holland or Germany would be worse off because of those countries' tax regimes.

However, one top accountant has described IR35 as a time bomb waiting to go off, as the first tax year of the widely criticised legislation comes to an end and contractors prepare to file their first returns under the new regime by 19 April.

"Many contractors are still in the dark about IR35 and could face huge tax bills when the Inland Revenue finally catches up with them," said Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants.

He added that the complexity of the legislation had made it extremely difficult for many to keep up with developments. "There's no safety net in place, since small companies no longer have an audit requirement," he said.

"Contractors could be faced with huge bills a few years down the line because they haven't been accounting for their tax properly. The results could be potentially crippling," he added.