Revenue rules out IR35 review
Hopes for a review of controversial tax rule IR35 have been dashed by the Inland Revenue just months after a pledge in this year's Budget to revisit the issue of small business taxation.
Link IR35 special area
The Revenue this week denied that the review of taxes for small business would include IR35. ‘We have no plans to review the legislation,’ a Revenue spokesman said.
But campaigners against the notorious measure believe there could still be a chance that Revenue and Treasury officials will revisit the rule.
Simon Juden, chairman of the Professional Contractors Group, said this week he remained hopeful that IR35 would be reconsidered in this autumn’s pre-Budget report. He believed that a statement in this year’s Budget left the door open to address IR35.
‘The chancellor stated that the tax-ation of small owner-managed businesses would be reviewed. This means that the government has implicitly recognised that measures such as section 660A and IR35 are causing problems. It is going to take a look at the whole sector and set up of these regulations which, in effect, prevent small businesses and freelancers from trading to their full effect,’ he said.
Paragraph 5.95 of the Budget states that the government will ‘consider the strategic issues raised by the growth in small owner managed businesses, as well as the changing nature of employment and contractual relationships’.
Juden compared the likelihood of a review to the paragraph 5.91 debacle, in which the government remained tight-lipped until the last moment, leaving many small businesses in the dark over whether or not to incorporate their companies.
Another sign that a significant review could fast be approaching is a survey being carried out by the All Party Parliamentary Small Business Group. The body of MPs is conducting an inquiry into owner-managed businesses and their tax in the UK including work on what effect recent changes, such as IR35 and the 19% tax on distributive profits, has had on their businesses.