The Conservatives have today said that, should they be elected in a few weeks time, they'll look at IR35 (the rules that aim, but have largely failed, to collect more tax and National Insurance from IT contractors and others working through their own limited companies) as part of a project to simplify tax.
As things stand, getting rid of IR35 is the only sensible thing to do. It generates next to no income for the Treasury (£9m last year apparently) while causing a vastly disproportionate level of worry and professional fees for contractors.
The alternative to getting rid of IR35 would be to enforce it properly, but it's just too unclear a set of rules for that to be feasible. Any attempt by HMRC to use it to collect extra tax ends up in a dispute taking years, which they often lose in the end anyway. As a result, HMRC appear to have pretty much lost interest in IR35 as a tool to increase the tax take.
We're happy with anything that simplifies a tax system that has mushroomed in complexity over the last 10 or 15 years. But, at the same time, the tax take is going to have to be upped somehow. So we won't be holding our breath on this possible change quite yet.
Given that IR35 is linked to the MSC Legislation, and various other measures, any Government is very unlikely to repeal IR35 in isolation in my opinion.
A general review of business taxation seems more likely, and it couldn't come sooner.
Just had news that HMRC has given up its 7 year fight against one contractor company (Larkstar Data Ltd) - in return for £129!
http://www.contracteye.co.uk/larkstar_data_settlement.shtml
Posted by: Bryan Jackson | April 22, 2010 at 05:01 PM