Is IR35 a baby too big for the pram?

by Susie Hughes at 10:44 28/03/17 (News on IR35)

The grumbling, rumbling row continues about the changes to the IR35 rules relating to contractors working in the public sector.

Lobby groups, agencies and freelancers have been up in arms after initial proposals to make agents and end-clients responsible for the IR35 status and possible tax liabilities. That approach was tempered somewhat in 11th hour changes to the final draft of the Finance Bill (See: Cautious welcome for IR35 ‘reasonable care’ clause - Shout99, March 2017) Following the amendments made to the IR35 aspect of the Finance Bill last week, the Association of Recruitment Consultancies has written to MPs, drawing their attention to what it considers to be some of the most important anomalies in HMRC’s approach. Adrian Marlowe, chairman of ARC said: “Although we welcomed the amendment to the Finance Bill which, crucially for the agency sector, now makes the public sector hirer liable for the consequent tax in various circumstances, we said at the time that the new legislation still created a number of problems.” “The legislation takes an entirely new and worrying approach to contractor and payroll tax and creates a whole series of difficulties. We think it right and proper for these issues to be drawn to the attention of MPs who are now being asked to consider the Finance Bill.” Mr Marlowe explained further: “The new rules go far beyond addressing tax avoidance and introduce a series of measures that not only break established principles of tax responsibility but also increase the values of tax and NICs, setting an unhealthy precedent for self-employed businesses and those that work with them. Advertisement “Apart from the lack of proper transitional provisions for existing contracts, the core underlying issue is the continued use of the old fashioned IR35 test as the starting point. Surely that baby is now too big for the pram? Its continued use leads to all the conflicts that arise, the need for the much criticised online tool, and the various damaging impacts that do not appear to have been properly thought through. We believe the new approach needs a thorough review so that it does not slip in under MPs’ radar. “We also believe that this entire area needs a total overhaul not only for IR35 but for supplied agency workers generally. The Government approach at the moment appears fragmented and based on tax avoidance as the driver whereas we believe that there should be a joined up approach that leads to better conditions for business in the UK, particularly important post Brexit. We advocated this last September in our Brexit Manifesto. “It therefore would make sense to await the outcome of the Matthew Taylor and HOC Select Committee reports into employment status and corresponding taxation expected later this year before accepting a new business tax regime now that effectively jumps the gun. We hope that MPs will see the rationale and will bring about a delay in implementation.” Text of the letter to MPs is available here. Tweet -- If you wish to comment on this article, please log in and use the Reply button below. Registering is free and easy - see 'Join Shout99'. - Susie Hughes © Shout99 2017

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