In the past, employment legislation IR35 has been seen as the almost exclusive concern of the UK’s contracting community.
Over time, this has changed as more and more business groups and politicians have voiced their opposition. Now, the Institute of Directors has bent at the knee and hurled themselves atop the anti-IR35 bandwagon that just keeps rolling…
The IoD has sent a submission to the Office of Tax Simplification (currently tasked with reviewing the legislation) which states that IR35 has been ineffective in its task and “has itself become a serious problem.”
To recap: IR35 was created in order to tackle the situation whereby someone could theoretically go home at the weekend as an employee of an IT firm, and then return on the Monday as an independent contractor. As a result they could take advantage of the tax benefits of running their own business whilst in spirit remaining an employee. It was a tax loophole that needed to be closed. For the Labour government of the time, IR35 was the answer.
Unfortunately it has instead created undue concern to legitimate contractors whilst simultaneously being ineffective in tackling the problem.
The IoD’s report shows that it’s not just the little guys who don’t like it.
“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,” the report states.
In submitting the report to the OTS, they are attempting to build a framework to show how IR35 could be replaced. There are no hard and fast answers, but when a system is so clearly broken it needs to be changed.
Read their submission to the Office of Tax Simplification here.
The IoD is made up of directors from high earning companies of various kinds with an annual turnover of more than £250,000.