IR35 reform is missed opportunity, says REC

Filed under Press release

Wednesday, 23 March 2011

Released on 23 March 2011

The REC today expressed disappointment at the news that IR35 will not be suspended or abolished - as the Office of Tax Simplification (OTS) had recommended, but will be kept entirely in its current form.

The Red Book published alongside the Chancellor’s Budget statement rejected abolition of IR35 on the grounds that it would ‘put substantial revenue at risk’, even though HMRC have never been able to provide clear figures on how much it brings in.

Instead, the Treasury offered a commitment to ‘making clear improvements in the way IR35 is administered’ by HMRC, including an IR35 helpline and publishing guidance on what sort of cases are typically considered out of scope.
 Responding, Gillian Econopouly, the REC’s Head of Public Policy, said:

“The OTS conducted a thorough and wide-ranging consultation with representatives from across the small business sector. The outcome was a recommendation to suspend IR35, giving immediate simplification to the system, whilst wider-ranging reforms were developed. We are disappointed that the Chancellor rejected this out of hand.

“The suggestion that abolition would lead to substantial revenue loss is hard to accept, as HMRC have never been able to provide clear figures on the income gained from IR35. At the very least the Treasury could have requested further consultation to determine this, and properly weigh up the revenue impact of the different options.

“As we recently warned, evidence from the Treasury Select Committee shows that HMRC are struggling to cope with their existing workload. It is difficult to see how they will be able to better implement IR35 with even more budget cuts on the way.

She added: “This is a missed opportunity for real, tangible simplification that would have helped entrepreneurs across the country. A dedicated helpline and other such measures are no substitute for real reform.

“Although there are mixed views on reforming IR35, the majority of members in affected REC sectors such as Technology and Engineering were clear that it needed to be substantially altered, if not abolished. Over 90 per cent of members in these sectors agreed that IR35 is simply not effective in its current form, and today’s announcement has failed to meet their expectations.”  


Contact: Ed Sexton

Phone: 020 7009 2192

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