IR35 Reform is Imminent According to Experts

Following the fairly negative Summer Budget 2015, HMRC have now released a discussion document surrounding IR35.

The good news about this document is that it is entirely suggestive at this stage, with none of the proposals entirely unexpected. 

The government have made it clear once again that the IR35 legislation will not be abolished, but they are not looking to widen the scope of the legislation neither. One positive element of the document is that the government is still seeking simple and straightforward rules for the legislation, something which has been a struggle since its implementation. 

It seems that there has been little agreement between the Office of Tax Simplification and House of Lords Select Committee over exactly how to improve the legislation, as any changes will always effect those genuinely operating a PSC. Initial suggestions for improved administration and/or an improved compliance response were deemed insufficient. 

Top suggestions for legislation reform are simplifying the legislation to focus on a single test and/or putting a level of compliance responsibility on engagers:

• After the travel & subsistence amendment made in the Budget, it was expected that a move towards making ‘supervision, direction or control’ the basis for determining employment status might form part of the discussion. This test is already basis for temporary workers in the agency rules, and would certainly simplify the legislation by basing it solely on one status test.
• Engagers in the public sector already play a role in compliance, so it is a natural progression for this to be applied across the board. Should this amendment go ahead, engagers will be expected to ‘consider whether a worker should be self-employed, or actually be an employee, and, if so, deduct the correct amounts of income tax and NICs as they would for direct employees’.

One thing that can be agreed upon is that the IR35 legislation as it stands is ‘not working effectively’ and there is ‘significant non-compliance with the current rules’. HMRC are looking to ‘level the playing field’ between taxation of employees and those who act like employees whilst recognising ‘the benefits to the economy of having a flexible labour market’. 

With no concrete decisions, contractors can take this opportunity to voice their opinions to HMRC regarding the reform of the legislation, they are even asking you for it.

E-mail your opinions, suggestions and concerns to [email protected] by the end of September 2015.

You can access the full discussion document here.

As one of the UK’s leading authorities on the IR35 legislation, Qdos will also be taking advantage of this opportunity to make a stand for contractors and have our say in the legislation’s reform.