Freelance Supermarket Logo

What can be done about IR35?

The dreaded IR35 legislation is in the spotlight yet again. The Office of Tax Simplification is going to look into ways of reforming it and various organisations have already put forward their ideas. It’s definitely going to be a challenge to find a solution.

The OTS has a remit to provide the Chancellor with an initial report that demonstrates that many contractors are uncertain of their status due to the complexities of IR35 and consider simpler and fairer alternatives. And of course any new legislation must not contain loopholes that could lead to tax avoidance.

The subject of employment status is complex and yet it has to be solved quickly because it could also have a bearing on whether an individual is affected by the Agency Workers Directive.

The Institute of Directors is one of the organisations that are fighting for a fairer system. One possible way to reform the system would be for workers to undergo an initial screening test and answer a fixed set of precise questions. That way, businesses would know at a glance whether a contractor came under IR35 legislation.

Of course, any new tests that are introduced to determine employment status and tax liabilities must be applied mechanically and without any vagueness. The questions asked in these tests would need to be very carefully worded so that the answer is either a clear cut Yes or No; not maybe, yes but or any other variation. Just Yes or No. But even if somebody manages to devise such a test, it's a knocking bet that a situation will occur in the future to throw it all into chaos again.

If anybody wants to get their point across, the OTS is hosting a series of roadshows around the UK, starting this month, where the team will be asking attendees in what areas the tax system is most complex for contractors and other SMEs. These roadshows will be an excellent forum for contractors to voice their views on the IR35 review directly to those who will be making recommendations to government. That is if we could only find out where and when they're taking place!

In the meantime, I'm sure our readers have their own views on a simpler system to replace IR35. We'd love you to share them with us...

© 2009 All rights reserved. Reproduction in whole or in part without permission is prohibited.
Image: me - no idea about it by aristidesroble