Revenue dampens hopes of IR35 review

Recent reports have indicated that there will be no changes to the IR35 legislation as part of the Government's review into the taxation of owner-managed businesses.

In the last Budget, Chancellor, Gordon Brown, made it clear that they will be issuing new proposals at the time of the next Pre Budget Report.

The Budget Press Notice 5 in March 2004, said: to ensure that targeted tax incentives support the Government’s objectives for growth, enterprise and productivity, the Government proposes to consider the issues raised by the interaction with the tax system of definitions of the income of self-employment, and the remuneration paid to owner managers.

At the time, this was thought to include issues relating to IR35 and other targeted small business measures, such as Section 660, the business tax between families and friends.

However, according to Accountancy Age the Revenue has now denied that this review would include IR35 saying that there are no plans to review the legislation.

On the one hand, it is difficult to see how a review of taxation measures which examine owner-managed businesses could exclude one of the main issues which concern them.

But on the other hand, one can see that the Government could be reluctant to change a measure which it introduced only four years ago without conceding that it got it wrong.

The Treasury seems to be holding its cards close to its chest and it is unlikely that the situation will clarify until the Chancellor reveals his thinking in the Pre-Budget Report, likely to be in November 2004.

Whatever the outcome, there are no indications that the current review will make life easier for small businesses.