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IR35 'anguish' will be eased, not cured

23 March 2011
Categories: News , Budget 2011 , IR35 , Employees , Income Tax
Abolition would put substantial revenue at risk, claims government

Freelance workers have expressed cautious optimism that the ‘anguish and anxiety’ of IR35 legislation will soon be eased.

The government has mapped out major reform of the administration of the rules, claiming abolition would ‘put substantial revenue at risk’.

The PCG, the leading representative body for freelancers, said IR35 had ‘caused anguish and uncertainty in the freelance community for the last 11 years’ and welcomed the mechanisms planned to ensure that HMRC improve their processes of administration, which will aim to

  • provide greater pre-transaction certainty;
  • provide great clarity by publishing guidance on the types of cases the Revenue views as outside the scope of IR35;
  • restrict reviews to high-risk cases carried out only by specialist teams; and
  • promote more effective engagement with interested parties through an IR35 forum.

PCG managing director, John Brazier said his organization was ‘encouraged’ by the plans outlined in the Budget.

‘We intend to play a key part in this process and are determined as a result to exclude all legitimate freelancers from the ongoing threat of an IR35 investigation, with all the uncertainty that brings,’ said Mr Brazier.

Emma Harvey of business law firm DWF, remarked that while IR35 ‘lacks clarity and no longer fits the commercial reality of contracting in the 21st century’, complete withdrawal of the legislation ‘would doubtless lead to a return to the past when many individuals worked as self-employed contractors when they were not’.

IR35 might be axed in the future, claimed Mike Nagle, an employment tax specialist with PricewaterhouseCoopers.

He said: ‘The proposals [in the Budget]... should help improve understanding but will still be a disappointment for those who had been hoping for a suspension or abolition... which had been seen as a possibility.

'However, this may still happen in the longer term, as a result of the potential integration of tax and National Insurance.’

Categories: News , Budget 2011 , IR35 , Employees , Income Tax
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