The coalition government’s commitment to a review of IR35 is a ‘triumph for common sense over political dogma’, according to the PCG, the professional association supporting freelancers, contractors and consultants.

In the coalition’s full programme for government, published last week, the government committed to reviewing IR35 as part of a wholesale review of all small business taxation, and sought to replace it with simpler measures that prevent tax avoidance but do not place undue administrative burdens or uncertainty on the self employed, or restrict labour market flexibility.

IR35 was proposed in the 1999 Budget of the then Chancellor Gordon Brown to target ‘disguised employment’ - workers who receive payments from a client via their own company. These payments are not subject to NICs as they can be treated as dividends, and workers can also save tax by splitting ownership of the company with family members to place income in lower tax bands.

Chris Bryce, chairman of PCG, says: “Over the last few months the PCG team has had a series of meetings with the Conservative and the Liberal Democrat shadow front bench teams. We are delighted our message was heard and action taken.   

“We applaud today’s decision and we will continue to work closely with the coalition government to ensure freelance workers are treated with fairness.   

“The PCG voice will still be heard working with and advising government where and when we are needed on behalf of PCG’s 20,000 members.   

“Freelancing is a growing and valuable part of the UK economy. We are delighted that at last we have a government that appreciates this.”