IR35 Guides - Are you inside or outside IR35?

Industry experts and interested parties have given their initial reactions to the IR35 "alternatives" proposed by the Office of Tax Simplification this week. We have included a cross section of views below:

The Professional Contractors Group has called on the Government to abolish IR35 following the publication of today's report.

The Institute of Directors (IoD) provided this comment:

"We can all support clarity: it should be easy for each person to work out his or her tax status. We are therefore disappointed that a new business test is only a third option for short-term change to IR35, rather than being the lead option."

Speaking with Contract Eye, Dave Chaplin, CEO of ContractorCalculator, said:

"Contractors are not facing a 'done deal' on IR35 as the OTS is calling for more debate on options for reform before its final report to ministers in June

"Clearly more data is required before ministers can make informed decisions about IR35 reform"

Kevin Green, Chief Executive of the Recruitment & Employment Confederation (REC), said:

"It is good news for contractors and agencies alike that the OTS has chosen suspending IR35 as their lead option for the Chancellor to consider. This was one of the two choices we deemed acceptable from this review, and it reflects a real understanding by the OTS that IR35 is unworkable in its current form."

Rob Crossland, Chief Executive of umbrella company Parasol, said:

"In the current economic climate, abolishing IR35 altogether is not a realistic proposition and so, for me, the first option put forward by the OTS is a non-starter..."

"Of the three solutions put forward by the OTS, I believe that the option to retain IR35 in its existing form, but with a commitment from HMRC to improve on the legislation and correctly enforce it represent the most beneficial to contractors. It's a case of better the devil you know and at the very least all parties know where they stand..."

Derek Kelly, MDr of ClearSky Accounting, said:

"...the uncertainly that the Agency Workers Regulations will bring in October will provide significant challenges for the industry to get to grips with. If sweeping changes were made to IR35 at this time then there could be mass confusion. The Government would be better focusing on providing clear and robust guidance to this and leave IR35 as is."

Stuart Davis, Chairman of the Freelancer and Contractor Services Association (FCSA), said:

"We welcome the publication of the OTS's interim report as it represents a significant step forward in the discussion around tax reform for small businesses and the self employed. It is, however, of deep concern that the recommendations display a continued lack of understanding of the flexible workforce, and in particular the consequences of combining income tax and NIC's, harmonising Corporation Tax rates, and modifying IR35 provisions. These moves may throw up barriers for the genuinely self employed and disincentivise freelancers and contractors choosing to work in this way.

"Given the vital role the flexible workforce and small businesses plays within the UK economy, FCSA is concerned that some of the report's recommendations, if followed, will cause considerable damage."

Martin Hesketh, MD of Brookson, said:

"... The OTS has put forward three options for consideration - keep it, abolish it or amend it. The fact all three obvious options have been suggested demonstrates there are no quick fixes to this area of legislation and there is certainly no consensus around the ultimate right answer. We believe the temporary suspension of IR35 would be the wrong move at the wrong time, leading to more uncertainty and increased non-compliance. It's definitely a case of better the devil you know at this point and we believe the way forward is to hold IR35 as it is, until the full debate around the medium-term answer has been finalised."