Since the recent report carried out by the OTS that was questioning the future of IR35 the decision has been made to retain the existing format but to improve on the way it is administered. This is according to the recent Budget documents.
The documents in question state that the government will commit to setting up a dedicated helpline staffed by specialists. The decision to retain the existing IR35 format was seen as the better option as the government believed that complete abolition of it would put ‘substantial revenue at risk’.
It was also stated during the proceedings of deciding what to do with IR35 that removing it completely would clash with the upcoming AWR regulations due to be implemented in October this year. Others have also made the comment that it is easier to better the devil you know rather than putting something new, and potentially worse, in place.
As a background to IR35 it was proposed in the 1999 Budget of the then Chancellor Gordon Brown to target ‘disguised employment’ — workers who receive payments from a client via their own company.
These payments are not subject to NICs [National Insurance Contributions] as they can be treated as dividends, and workers can also save tax by splitting ownership of the company with family members to place income in lower tax bands. With the ideas out forward it will probably be better enforced in future.