Archive for the ‘IR35’ Category

Government response to the House of Lords’ IR35 report

Friday, June 13th, 2014

The Government has now published its response to the House of Lords’ Select Committee IR35 report.

IR35 won’t be abolished, but we knew that already. So can we expect any changes at all? Interestingly, it seems that yes we can. Most are likely to be administrative, but some could also bring further clarification in this tricky area and others may eventually lead to a slight reduction in the administrative burden. A few highlights follow below.

The Exchequer protection and costs of IR35
The Government’s response provides a little more analysis of the £550m saved through IR35 and the accompanying Exchequer protection. Clearly some sweeping assumptions have been made to reach these figures, but then this was always going to involve some guesswork particularly around taxpayer behaviour. It acknowledges

‘The main areas of uncertainty in this costing relate to the salary levels at which individuals would incorporate and the number of directors who would change their remuneration strategy in the absence of IR35. Emerging evidence, including that provided to the Committee by HMRC in arriving at the IR35 costing, indicates that those on lower salaries are incorporating and that the salary bracket used in the calculation for employees could therefore be further expanded.

‘HMRC will publish during autumn 2014 an updated administrative impact assessment note setting out the current administrative costs which taxpayers incur in dealing with IR35.’

The IR35 Forum
The government clearly believes that the work of the IR35 Forum is going to play an important role in making administrative improvements to the system. HMRC will continue to work with the Forum to seek to raise contractors’ awareness of IR35 and dispel perceptions that HMRC is targeting those genuinely in business providing their services through a personal service company. It is hoping to find ways to further streamline the operation of IR35 and the Business Entity Tests are going to be looked at again.

The “service company” questions on the personal tax return SA100 and the real time information employer year end declaration (formerly P35)
Since these questions first appeared they have caused confusion and irritation to those operating payrolls and to individuals (and their agents) completing tax returns. HMRC is to undertake a full review of these questions with a view to making any necessary changes at the earliest practicable date.

As contractor accountants, Clear Accounts provides IR35 advice so that you can assess your position and avoid falling foul of IR35 legislation.

Critical House of Lords Select Committee Report brings call for the suspension of IR35

Monday, April 7th, 2014

A recently published House of Lords Select Committee report which raises questions regarding the effectiveness of current IR35 legislation has led to the PCG calling for the suspension of IR35 while proper consideration is given to its abolition.

Chris Bryce, CEO of PCG said:
‘The conclusion of the Committee is that abolition or suspension of the IR35 legislation, whilst attractive, would be unwise if HMRC can prove it provides Exchequer protection to the tune of £550 million.
‘The simple fact is, HMRC cannot do so. PCG has repeatedly asked HMRC to justify the £550m figure and the so-called ‘deterrent effect’ but HMRC has been unable or unwilling to do so. It is now clear from the findings of the House of Lords Select Committee that the effectiveness of this legislation and the justification for its continued existence is built on smoke and mirrors.
‘We are calling for IR35 to be suspended while proper consideration is given to its abolition. Removing this unnecessary legislation will allow the UK’s flexible workforce to do what they do best – boost British business. The Government has refused to listen to the cries for help from the hundreds of thousands of contractors, freelancers and independent professionals blighted by IR35, but they cannot ignore the findings of the Committee.’

The full news PCG news item can be read here

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