Subject: IR35 and your offer of help To: tlo.hewitt@tlo.dti.gov.uk Cc: dhd@exnet.com Dear Ms Hewitt, I met you at the ISPA Parliamentary Forum several weeks ago and complained about the effects the IR35 tax-regulation changes would have on my business: you very kindly offered to examine my case in a little more detail. My colleague and I founded ExNet Ltd in 1988 to develop software. We got GBP20,000 of venture capital first and then a further GBP50,000. These investments proved insufficient for the purpose and the company ran out of money, so I started working as an IT consultant on ExNet's behalf. This enabled us to keep the company alive, repay our debts (including, eventually, our original VC investment) and keep trying to develop our products. In 1992, still working as a consultant, I took ExNet onto the Internet---a real leap of faith at that early date. We became an Internet Service Provider and remain so to this day. This side of the business has never made a profit but has employed and trained several people who have moved on to gainful employment elsewhere. Our most recent venture is the development of a mobile e-commerce product, funded so far entirely from my consultancy earnings. As our accounts show, ExNet has never made a significant profit and has never paid a dividend; my salary is low by industry standards and always has been so; I have no company car or other perks. If I had kept all my earnings as a consultant over the last nine years, rather than investing them in technology development and employing other people, I should be very comfortably off and able to laugh at the upcoming tax changes. As it is, I am faced with the invidious choice of moving offshore or abandoning the company that I've worked to build and which still has a part to play in this country's technological progress. In twelve years in business, I've done everything that government and tax authorities have urged and demanded, from innovation through training to investment of (non-existent) profits---all at significant cost to myself. The country has certainly not suffered through this, and several people have gained employment, training and opportunity. Yet the Chancellor has decided that I'm cheating the Revenue and taking unfair advantage of the permanent employees next to whom I sit in my consultant's role, many of whom take home far more money than I. This is an unwarranted slur and cynically ignores the risk-cost that I pay and that they escape. I hope that you will agree that IR35 is an unfair imposition on me and my company, and I should be most grateful for any support in putting this case to the Chancellor, to your colleagues in government and to the Revenue. Yours sincerely, Damon Hart-Davis MD, ExNet Ltd http://www.exnet.com/
Here is the e-Minister's response, sent by email!