News emerged this week that a number of industry experts had been recruited to the Office of Tax Simplification in order to assist with the reform of tax laws as they apply to small businesses (see “From Spaghetti to Nouvelle Cuisine – New OTS Experts to Slim IR35 down”, October 26th 2010). The UK’s contractor workforce can now also draw comfort from the addition of another powerful force in the quest to reform IR35 compliance rules – none other than the Institute of Directors (IoD).
Richard Baron, Head of Taxation at the IoD, makes it very clear in the organisation’s submission to the OTS that with the advent of IR35, an attempted to solution to a taxation difficulty has itself become a major problem. As many contractors who run their own Ltd Companies can testify, the rules determining whether or not one is classified as self-employed are presently about as clear as industrial smog. The IoD holds that in too many cases, neither the individual contractor concerned nor the HMRC can foresee what the outcome of an enquiry will determine, a politely coded way of saying that, with the rules in the mess they’re currently in, it’s not possible to foretell whether an expensive (and stressful) enquiry will turn out to be remotely worthwhile to either party.
To make matters worse, the IoD submission continues, in addition to the anxiety generated by an enquiry, the investigation of IR35 compliance issues inevitably results in companies expending resources they can ill afford to use in order to reveal their position.
