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Still to this day there is a lack of clarity around IR35 and its legislation, with the main gripe being that there is no set in stone rules as to what does, and what doesn’t constitute being inside or outside of IR35 and how to prove and evidence such. This continues to lead to a mountain of complaints from the public, specifically contractors on the matter, as only legislative and case precedent seems to guide the matter forward and creates uncertainty, which is far from ideal given the financial implications at stake for so many people and can lead to long term stress if under a HMRC investigation. The decision was that IR35 was too important to scrap and that modifications and enhancements were to be made instead. As always though with government changes the new introduction of legislation has been slow moving and to date only a few changes have been made.
The main criticism from both sides towards IR35 that still exist today include:
|There are two sets of rules (public-sector and private-sector)|
|It is overly complex|
|Its original reasons for being established have been forgotten|
|Its has led to many tax planning schemes that have caused further losses to HMRC|
|Those outside IR35 pay less as they pay Employers NICs as well as Employees NICs|
|It tars all with the same brush, but many operate for reasons other than tax avoidance|
|It denies contractors legal, state and other benefits that employees are entitled to|
|It appears to have raised little of the money it initially claimed it would|
|Larger companies have gained a benefit over smaller businesses as a result of IR35|
|It encourages companies to offshore rather than source from the UK|
|The ‘deemed payment’ calculation is overly complex|
The above criticism and the approach of HMRC to each investigation, which tends to differ on a case by case basis and which has seen HMRC suffer more than a couple of embarrassing defeats in various cases means that the IR35 waters continue to get even murkier.
However, IR35 isn’t about to go away any time soon, and as we have seen with the 2017 'off-payroll' rules applied to those working in the Public-Sector, the modern day contractor needs to keep an eye out for the periodic legislative updates to ensure they remain compliant in what is an overly complex and cloudy arena.
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