The Future of IR35

Quite simply no one knows exactly that the future of IR35 holds or what it will look like, that much we know. IR35 is a hot potato of a subject for the government, with reviews of some form or another in to how it can possibly be reformed, replaced or even scrapped having been undertaken by the Office of Tax Simplification in 2001, The Personal Service Companies Committee in 2014 and the IR35 Forum in 2015, with HMRC all but admitting that these reviews fell short of what was expected, which a cynic could claim to be easy to implement solutions in an attempt to recoup some of the £430m that it is claimed IR35 non-compliance costs the Exchequer.

With HMRC not giving up, the outcome of its discussion document of late 2015 has seen changes to a myriad of minor legislations with some making sense whilst some made interesting reading. However, the biggest change was to contractors working for Public Sector bodies, with the onus shifting to the end client to effectively police IR35 and ensure the correct taxation and NIC is collected and pain on to HMRC, a move which will likely lead to yet more confusion, unclear IR35 status battles and interesting solutions in an attempt to see a contractor take home the same pay as they were before, all to be added in to the current grey are of IR35 as a whole…

We therefore have a situation where we have IR35 guidance and rules for non-public sector contracts and one for public sector contracts. If the public sector solution is a sign of things to come then the future will be very interesting and everyone will get their tin hats out and fight their corner, but it could be that we go back to square one again and nothing much changes as HMRC scratch their head. Ultimately it is quite clear that anyone predicting the future of IR35 is either extremely gifted, going out on a limb or very very brave.