IR35 recommendations and responses are mainly 'rhetoric'

The recommendations and responses relating to the review of the administration of IR35 have been dismissed as 'a PR plan' by a firm of specialist accountants.

IR35 has been under constant review and scrutiny since its inception in 1999. There have been discussions, debates, promises and commitments about its abolition, its reform, its review and its overhaul. Two years ago, after another series of consultations and committees, it was decided to retain the legislation but to improve the administration of it.

Part of this resulted in the shambolic and misused Business Entity Tests which were almost universally acclaimed to be unfit for purpose and were recently abolished.

The industry/expert/HMRC advisory panel, the IR35 Forum, has been reviewing the intended improvements to the administration process and recently came up with a series of over 30 recommendations for HMRC to consider and take on board.

However, HMRC's response to these recommendations fell short of expectations, and the recommendations themselves were in the main related to improving knowledge and education about IR35.

Rhetoric

As a result, it was not overwhelmingly welcomed by contractors and their providers and advisers.

Derek Kelly, managing director at ClearSky Contractor Accounting, said: "This document contains plenty of rhetoric, but it won't change a thing. The people who need to know about IR35, namely contractors, already know about it – either through their accountant, recruitment firm or trade association.

"The report's recommendations seemingly amount to a PR plan for IR35. Is that really what's needed for a piece of legislation that is now 15 years old? I for one don't believe so. Instead HMRC should focus on enforcing IR35 through use of its existing powers. I dread to think how much this review cost to produce. Contractors, along with service providers and recruiters, will now be hoping for a period of stability and certainty regarding IR35."

Background

In 2010 the Government asked the Office of Tax Simplification (OTS) to review IR35 (the Intermediaries legislation). The OTS concluded that IR35 should either be suspended with a view to abolishing the legislation or retained but with much improved administration.

The intention was to improve the way IR35 is administered, which included the establishment of the IR35 Forum, an advisory and discussion group of HMRC officials; professional practitioners and industry and trade representatives was established.

IR35 Forum has now reviewed the progress against the objectives to improve the practical operation of IR35.

External Forum Members have worked with HMRC Forum Members to produce detailed reviews of five specific areas with recommendations attached to each. The publication of this report brings together those reviews, and sets out HMRC's response to the recommendations.

Full details of the report are available here: IR35 Forum: Administration Review.