The drive for individuals to provide services through intermediaries comes from a number of different parties including employers, end clients and employment agencies, members of the IR35 Forum noted at the Forum’s inaugural meeting.
Minutes of the meeting held on 6 May, published on HMRC’s website, note that members observed that there are circumstances where IR35 is clearly relevant, but there are occasions when what HMRC regard as attempts to avoid tax are simply ‘a reflection of what some people had to do to get work’.
Some members observed a lack of consistency in the way HMRC managed risk assessment and case selection procedures across the country, while HMRC said they applied risk assessment criteria on a consistent national basis. The department was unable to publish detailed risk criteria.
The government decided at Budget 2011 to retain the IR35 ‘intermediaries legislation’, because abolition would put ‘substantial revenue’ at risk, but it is seeking to improve the administration of the system.
The improvements will include a dedicated helpline staffed by specialists, guidance on the types of cases HMRC regard as outside the scope of IR35, and restricting compliance reviews to high risk cases.
The members of the Forum, set up to monitor HMRC’s new approach, include the CIOT, ICAEW, the Federation of Small Businesses, PCG (formerly known as the Professional Contractors Group), and IR35 specialists Kate Cottrell and Anne Redston.
The Office of Tax Simplification’s review of small business taxation reported in March that IR35 proved to be the ‘thorniest’ topic it had encountered.
‘It encapsulates the tension between HMRC, who are tasked with applying the tax code in order to protect and gather revenues, and individual businesses who see IR35 as a barrier to them running profitable small enterprises with all the risks that this involves,’ the OTS said.
IR35 should become obsolete if the integration of income tax and NICs reduced the differential between rates applicable to different incomes and reduced pressure on the boundary between employment and self-employment, the OTS suggested. But reducing that differential would not be easy. In the meantime, the OTS recommended that the government should consider either suspending IR35 ‘with the intention of permanent abolition’, or improve its administration.
The stated objective of the legislation is ‘to ensure that, where an individual provides services to an end user through an intermediary and the circumstances are such that he or she would have been viewed as an employee of the end user if he or she had been engaged directly, the income received is subject to tax and NICs as employment income’.
The drive for individuals to provide services through intermediaries comes from a number of different parties including employers, end clients and employment agencies, members of the IR35 Forum noted at the Forum’s inaugural meeting.
Minutes of the meeting held on 6 May, published on HMRC’s website, note that members observed that there are circumstances where IR35 is clearly relevant, but there are occasions when what HMRC regard as attempts to avoid tax are simply ‘a reflection of what some people had to do to get work’.
Some members observed a lack of consistency in the way HMRC managed risk assessment and case selection procedures across the country, while HMRC said they applied risk assessment criteria on a consistent national basis. The department was unable to publish detailed risk criteria.
The government decided at Budget 2011 to retain the IR35 ‘intermediaries legislation’, because abolition would put ‘substantial revenue’ at risk, but it is seeking to improve the administration of the system.
The improvements will include a dedicated helpline staffed by specialists, guidance on the types of cases HMRC regard as outside the scope of IR35, and restricting compliance reviews to high risk cases.
The members of the Forum, set up to monitor HMRC’s new approach, include the CIOT, ICAEW, the Federation of Small Businesses, PCG (formerly known as the Professional Contractors Group), and IR35 specialists Kate Cottrell and Anne Redston.
The Office of Tax Simplification’s review of small business taxation reported in March that IR35 proved to be the ‘thorniest’ topic it had encountered.
‘It encapsulates the tension between HMRC, who are tasked with applying the tax code in order to protect and gather revenues, and individual businesses who see IR35 as a barrier to them running profitable small enterprises with all the risks that this involves,’ the OTS said.
IR35 should become obsolete if the integration of income tax and NICs reduced the differential between rates applicable to different incomes and reduced pressure on the boundary between employment and self-employment, the OTS suggested. But reducing that differential would not be easy. In the meantime, the OTS recommended that the government should consider either suspending IR35 ‘with the intention of permanent abolition’, or improve its administration.
The stated objective of the legislation is ‘to ensure that, where an individual provides services to an end user through an intermediary and the circumstances are such that he or she would have been viewed as an employee of the end user if he or she had been engaged directly, the income received is subject to tax and NICs as employment income’.
