Government cuts back IR35 tax rate

The Government said last week it will cut its IR35 contractors' tax from 12.2 per cent of salary to 11.9 per cent. However, the reduction fell short of the 11.7 per cent rate that was hoped for.

Iain Sutherland, director of operations at tax group 3 sixty, said: "We trust the Inland Revenue will make an adjustment for this, and will listen to those who continue to demonstrate over the problems."

IR35 is on the point of becoming law following the collapse of the Lords' rearguard fight over aspects of its parent legislation, the Welfare Reform and Pensions Bill.

The Inland Revenue is to begin consultations with Customs and Excise and representatives of practitioners and service companies to draft guidelines for the new regime. It is understood that this will include a revised definition of self-employment.