Business News
Institute of Directors slams IR35
The Institute of Directors, IoD, has come out in strong opposition to the IR35 tax measure, branding it ‘ineffective’.
Richard Baron, head of taxation at the IoD, explained the organisation’s opposition in a recent submission to the Office of Tax Simplification:
“We argue that while IR35 may have been expected to have been a solution to a specific problem when it came into force in 2000, experience has shown that it has not been an effective solution, and that it has itself become a serious problem.”
The IoD submission stops from proposing a full replacement for IR35, but does suggest a framework and possible outline of a solution.
In the past, the success of campaigns against IR35 have created an impression that it is a problem for contractors and their advisors only, but the IoD’s stance confirms that this disenchantment with the measure is now a mainstream concern.
Companies that take on a contractor, who is then deemed to be ‘employed’, end up in HMRC’s sights for recovery of both PAYE and National Insurance payments.
According to the IoD, IR35’s main weakness is it reliance on the employment vs. Self employment test. The submission concludes:
"Very often, neither HMRC nor the contractor can tell in advance what the outcome of an enquiry will be.”
"The difficulty of applying the employment status tests is the key reason why IR35 has become a problem. It imposes a burden out of all proportion to its effectiveness," the paper concludes.”
"Not only are contractors unduly burdened. 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. If it were possible to move away from IR35, red tape for businesses could be cut and HMRC resources could be freed up."
