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26 Oct 2010
The Institute of Directors has labelled IR35 as a "serious problem" in its submission to the Office of Tax Simplification.
The IoD lays out a route for resolving issues with the tax rule that affects self-employed contractors and says: "Only consultation with a wide range of affected taxpayers and professional advisers can determine which specific solutions are even worthy of consideration."
IR35 is the highly contentious tax rule designed to deal with people that the taxman considers are disguised employees - they claim self employment but are otherwise doing a job that is being done elsewhere by salaried employees.
It was introduced in April 2000, has been highly criticised and has been challenged numerous times in the courts.
The IoD said: "IR35 imposes a burden out of all proportion to its effectiveness."
HMRC staff are tied up doing frustrating and often unproductive work, at a time when HMRC staffing is under pressure and there are more useful things that the staff concerned could be doing."
The Office of Tax Simplification is headed by John Whiting, a former PwC partner and tax policy director at the Chartered Institute of Taxation.
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Visitor comments Add your comment
Be careful what you wish for....
It is now some 10 years since the introduction of IR35 and it has settled down considerably over that time. There have been a good number of IR35 cases heard and as a profession we have a solid grasp of the relative importance to be given to the various badges of self-employment (subsitiution, supervision etc). Unless there is a fundamental review of the whole basis of business taxation, this grey area of employment v self-employment will remain. The last thing we need is to have IR35 replaced by some crude status rules like the proposals for CIS subcontractors. Perhaps we should keep the devil we know.
Posted by: Jon Griffey, 26 Oct 2010 | 00:00
But the risks and rewards are so distorted...
The companies that hire the people caught by IR35 get away without paying Sick Pay, Holday Pay, ERS NI, Pension contributions.
They have the ability to hire and fire with no notice.
As their sub contractor is a Ltd Co.
But the director of that sub contractor is taxed on the turnover of the business as if he was an employee.
The risk is with the little guy, the reward is with the big guy.
Surely if the little guy is a pseudo employee, the main companies should be FORCED to pay at least 20 days a year during which no work is expected etc etc
Posted by: Eleanor, 08 Nov 2010 | 14:34
companies
i don't see why companies should provide any benefits to IR35 employees..
they get a large markup on what a normal employee gets paid anyway (normally 25-35%) which should cover any employment related benefits.
Posted by: t3, 08 Nov 2010 | 18:50