REC survey confirms need for radical IR35 reform

Filed under Press release

Monday, 07 March 2011

Released on 7 March 2011

Over 90 per cent of recruiters in sectors affected by the IR35 tax rules believe they are not effective and must be reformed, according to a recent REC survey. These findings will be fed into the Office of Tax Simplification (OTS), which is currently reviewing IR35 and will be submitting their initial report to the Chancellor later this month.

IR35 was designed to prevent false self-employment, but the feedback from recruiters confirms that this goal has not been achieved and that the rules have created a number of issues for contractors. The REC was recently invited to sit on the OTS’s small business consultative committee, which has ensured that the feedback from members is informing the current IR35 review.

Some 92 per cent of respondents to the REC survey in affected sectors such as Technology, Engineering and the Interim Management Association said that IR35 is not effective in its current form. Uncertainty caused by the current rules lies at the heart of this dissatisfaction. ‘Lack of advance certainty of being in or out’ and ‘open to interpretation’ were the two most common reasons recruiters gave for being unhappy with IR35.

Asked what should happen to IR35, just 2.7 per cent of recruiters said it should remain in its current form. Nearly half of those surveyed called for the rules to be abolished altogether, whilst 38 per cent called for them to be amended to give contractors, recruitment agencies and clients more certainty about the tax situation.

Commenting on these survey results, Jeff Brooks, REC Technology Chair, said:

 “IR35 has been an awkward, unsatisfactory attempt to tackle the problem of disguised employment ever since it was set up in 1999. These survey results make it plain that the recruitment industry would not accept anything less than a serious overhaul of the current system.

“Whilst many recruiters would be happiest to see IR35 simply removed from the statute book, there would also be support for a pragmatic attempt to clarify the rules. If contractors, employers and recruiters could be certain in advance whether they fall within IR35 or not, many of the current problems could be eliminated.

“Reforming the tax system is by no means an easy task. The Government was right to ask the OTS to undertake a thorough review of IR35, and the latest feedback from recruiters confirms that major change is needed.”

 

 

Contact: Ed Sexton

Phone: 020 7009 2192

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