IR35 status quo impossible, warn recruiters

IMPROVING FREELANCE tax rules could be impossible with the taxman's current workload, warned the Recruitment & Employment Confederation (REC).

With the chancellor mulling over how to deal with much-disliked IR35 freelance tax regime, the REC believes that HMRC's resource constraints would make it difficult for it to find a way better and more effectively enforce the rules.

"With a further 15% cut already planned to their budget, it seems highly unlikely that the Revenue will be able to provide the added scrutiny that would be required if IR35 were simply left in its current state, as the OTS has proposed," said Gillian Econopouly, head of public policy.

"Even more worrying is the recent admission in a Freedom of Information response that HMRC does not hold data on the costs of pursuing IR35 enquiries and tribunals, and even has only limited data on the additional revenue generated by IR35."

Econopouly said that suspending the rules, or creating a much clearer business test to gauge whether IR35 applies, were better options for the Treasury to take.

"If they cannot say how much the tax brings in, or how much it costs to enforce, how can there be any confidence that HMRC can step up their game and turn around this failing system?"