TaxCorporate TaxBudget2011: IR35 to stay in place

Budget2011: IR35 to stay in place

Government will improve administration of controversial freelance tax rules but not scrap them

MUCH CRITICISED freelance tax rules will stay in place, the government has announced during today’s Budget.

Known as IR35, the tax rule outlines how freelancers are treated for tax purposes – either employed or self-employed.

The rules have been criticised as being far too complex, but rather than start again the government has introduced details to better administer IR35.

A dedicated helpline staffed by specialists will be set up, said the government today, and restrict review to high risk cases. An IR35 forum will be formed that will monitor HMRC’s approach.

Anne Redston, barrister at Temple Tax Chambers, said that keeping IR35 was “disappointing”.

Although she welcomed better administration of the scheme, she voiced concern that the complexity of the rules had failed to be dealt with.

“The real problem is that the definition is inherently unclear. People don’t know whether they’re [caught] in it or not,” she said. “The problems embedded within it won’t go away.”

The Office of Tax Simplification recently announced a series of options for the government to take on IR35. Options provided by the OTS were: to cancel IR35 – which it warned could increase tax avoidance; or reform through simpler ways to test a person’s tax status.

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