The Conservative and Liberal Democrat coalition Government is assessing the possibility of getting rid of what has been considered by many as a controversial and troublesome tax law, IR35.
The law, which was brought into being in 2000 by the then incumbent Labour Government, was enacted to enforce the payment of national insurance and tax by contractors. This is assessed on the earnings of those working within the contracting company if the role they carry out could be considered to be equal to that of employees of the client company, despite labeling themselves as contractors. The primary aim of the tax law was to curb the amount of people not paying the correct amount of tax (the belief was that it would bring in somewhere in the range of £220 million per year in unpaid taxes) – yet ultimately it caused confusion more than anything else, with some contractors having to pay vast amounts of tax unnecessarily and the Government collecting just £1.5 million ultimately.
Whilst there has been no official announcement that IR35 is to be scrapped the Government has said that it wishes to simplify taxation and introduce a scheme that helps small businesses and cuts the amount of red tape.