Contractors have been vocal for many years now regarding the IR35 tax rule and their wish for its abolition. Now the Institute of Directors have joined the campaign for the intermediaries legislation to be repealed.
Handing a paper to the Office for Tax Simplification (OTS), the IoD referred to IR35 as “a serious problem”. They pointed to investigations which find contractors to be inside IR35 and the subsequent effect on organisations who have hired them, when the taxman comes knocking for PAYE and NICs. It is the belief of the IoD that tIR35 should be replaced with a specific test for contractors based on their working practices. They also believe an initial screening test should be introduced.
Speaking to Contractor UK, Richard Baron, head of tax at IoD commented:
“We want to take as many businesses as possible out of the scope of the replacement for IR35 in order to minimise the hassle for businesses. If a large number of businesses could take one look at an initial screening test and know straight away that they do not need to worry [about the contractor’s IR35 status], that would be very helpful.”
Speaking about the introduction of a test for contractors, the group told OTS: “The test would however need to be one that would allow most contractors to be confident of their likely status for a tax year, or for an engagement, while the year was in progress or before starting the engagement. Otherwise they might not put enough money by to cover tax and national insurance (NI) liabilities.”
IoD concluded their submission by stating: “The managed service companies’ legislation, which was necessitated by the impracticality of applying IR35 on any large scale, has tackled the bulk incorporation of whole workforces. There is a case for some replacement for IR35… [but the legislation has] has turned out to be a bad solution to a problem that has shrunk”.