TaxCorporate TaxIR35 should be abolished or reformed, says OTS

IR35 should be abolished or reformed, says OTS

The IR35 legislation must be abolished or undergo a change in implementation from HMRC, the OTS's review of small businesses has said

THE TREASURY SHOULD suspend IR35 or compel HM Revenue & Customs to make changes to its implementation until wider structural reform is introduced, the Office of Tax Simplification has said.

The legislation, which stipulates employment income through the use of intermediaries, would be rendered redundant by an integration of National Insurance and income tax, the OTS said in its review on small businesses. Until this happens, the government should consider suspending it with a view to abolishing it or make specific changes to its enforcement.

The anti-avoidance measure was “administratively burdensome”, the review said. It added that the legislation had been “managed round” by contractors with “few, if any” people being subject to it.

An abolition of IR35 would deliver the greatest improvement, the report said, and would be welcome in the contactor communities. However, this could result in greater use of intermediaries to reduce liabilities, especially considering the “aggressive marketing strategies used in the IR 35 industry”, it warned. This could lead to “significant” Exchequer funds being put at risk, the report added.

Improving the administration of the policy would deal with issues such as the fear of investigation, the length of time an investigation took and the uncertainty involved.

It also suggested that a range of simple business tests could be introduced to exempt certain businesses from IR35. This recommendation, however, received strong opposition from some members of the consultative committee, as well as support.

Related Articles

OTS report: Corporation tax should follow accounts

Corporate Tax OTS report: Corporation tax should follow accounts

5m Alia Shoaib, Reporter
Five key tax and business burdens the chancellor must ease in Autumn Statement

Business Regulation Five key tax and business burdens the chancellor must ease in Autumn Statement

1y Kevin Reed, Writer
OTS seeks feedback on tax simplification strategy

Accounting Standards OTS seeks feedback on tax simplification strategy

2y Fraser Simpson, Reporter
OTS outlines income tax and NI alignment plans

Corporate Tax OTS outlines income tax and NI alignment plans

2y Fraser Simpson, Reporter
Tax code complexity could damage economy, warns think tank

Corporate Tax Tax code complexity could damage economy, warns think tank

2y Fraser Simpson, Reporter
OTS recommends simpler tax package for SMEs

Corporate Tax OTS recommends simpler tax package for SMEs

2y Fraser Simpson, Reporter
Knight's suitability as OTS chief questioned by MPs

Corporate Tax Knight's suitability as OTS chief questioned by MPs

2y Fraser Simpson, Reporter
'Live' online tax accounts set to kick off

Corporate Tax 'Live' online tax accounts set to kick off

2y Kevin Reed, Writer