Freelancers will be pleased to hear that the review of IR35 rules is likely to be much wider than was originally thought.
John Whiting, the Tax Director at the newly set up Office of Tax Simplification said recently that he believes they needed to consider IR35 in its entirety.
He agreed with the majority of freelancers that the current rules surrounding IR35 are not very effective and that the OTS had to find out why that had happened. However, the legislation was introduced to tackle real tax abuse and any alternative must still prevent abuse.
The OTS needs to deliver its report in time for next year's budget but Whiting warns that it will take time to carry out an in-depth review of IR35. One reason why IR35 has become so unpopular with freelancers is the definition of employment status. Is somebody a contractor or employee? Coming up with status definitions is one area that the OTS might need to spend a considerable amount of time clarifying.
Some experts are welcoming the news that the review may take longer than originally expected. Whiting has said that he wants to avoid a 'sticking plaster' solution and if the price to pay is a few more months waiting for a proper, fair and workable solution, it's a price worth paying.
The original draft IR35 legislation was supposed to make sure that people who were legitimate employees received employment benefits, but this was omitted in the final legislation.
Contractors do need to be aware that regardless of what takes the place of IR35, it will still be tax legislation and will still need to be adhered to.
© 2010 All rights reserved. Reproduction in
whole or in part without permission is prohibited.
Image: waiting
...could be the hardest thing by red twolips