The IR35 Tax Proposal: Plea to Hewitt 2nd March 2000

Here I made another attempt to get the assistance of the E-commerce and Small Business Minister, Patricia Hewitt MP. Her response is at the end.
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!

Date: Wed, 15 Mar 2000 11:44:05 +0000
From: Hewitt MPST 


By email:dhd@exnet.com

Damon Hart-Davis Esq
MD- ExNet Ltd.


Thank you for your e-mail outlining in more detail your concerns regarding the IR 35
proposals, following our recent conversation at the ISPA Parliamentary Forum.

I am most grateful to you for setting out the case history of how you have developed
ExNet Ltd and the potential impact of the IR 35 proposals. I am forwarding your e-mail
to my colleague Dawn Primarolo so that she may take account of the points you have
raised.

Best Wishes

Patricia Hewitt

IR35 index.

Damon


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