Hague slams IR35 and calls for brain drain to be plugged

Tory leader William Hague last week warned that the Government's controversial IR35 legislation will lead to a brain drain as self-employed IT workers flee higher taxes in the UK.

Self-employed workers currently operating as one-person service companies fear that IR35 guidelines drawn up by the Treasury mean they will be forced to pay the same levels of tax as permanent employees.

Hague said the Conservative Party is opposed to IR35: "I think it's the first time we've had the danger of a brain drain in 20 years in this country.

I really think it could hit some businesses very hard. The Government should reconsider legislation like this if we want businesses that could just as easily go anywhere else in the world, to come here."

A Treasury spokesperson said: "IR35 is here to stay. It's a measure to ensure that all citizens pay the same amount of tax. Why should a person earning £100,000 per annum be taxed less than a teacher or a plumber?"

However, Jon Willis, a Manchester-based networking consultant, agreed that a brain drain was likely. "I think some networking expertise will be lost overseas. I know of a couple of contractors that are already thinking of doing just that," he said.

Susie Hughes, spokeswoman for lobbyist the Professional Contractors' Group, said some agencies are not close enough to their customers to realise they are leaving.

"The first they will know is when the contractor's phone rings off the hook." She added that IR35 has already convinced freelancers currently working abroad to stay there.

Asked whether Hague's intervention could cause the Government to reconsider, Hughes said: "One would hope so. However, to date, the Government has lived down to our expectations at every turn."