IR35 consultation – overview for contractors

It is entitled “discussion document,” but an 11-page PDF from HMRC is effectively the first part of a consultation to reform IR35, ahead of further consultation after September 2015.

HMRC seeks views on the current IR35 system and, specifically, wants to receive:

1. Any evidence on the use of other types of intermediaries, aside from PSCs, to which IR35 may apply.

2. Any evidence on how PSCs currently operate IR35 and the issues the rules create for individuals and businesses across the market.

3. Any proposals for how to improve the effectiveness of IR35 that meet the objectives outlined in this document.

(The objectives are: to protect the Exchequer and, to level the playing field between those who are employed directly and those who would be employed directly if they were not operating through their own company).

4. Any views on the potential option of the engager taking on a greater role in being responsible for operating IR35, including:

• Whether such an approach would be effective in achieving the objectives
• How it could be made as straightforward as possible for engagers to determine whether IR35 should apply as part of their routine hiring conversations
• Whether there are particular sectors or types of engagers which would face particular challenges
• How such an approach should work where a PSC is engaged by an individual rather than another business, and if there should be different rules which apply in these circumstances
• Any other views on the impacts of such a change and how they might be addressed to minimise any additional burden on engagers

5. Any views on the implications of a change in the test which determines whether IR35 applies, both positive and negative, and what stakeholders’ preferred approach would be.

Final considerations for contractors before responding to HMRC

►“The government intends to use this stage of the consultation process to better understand the issues and explore options for reform, including what the impacts would be if engagers take more of a role in ensuring that employment taxes are paid correctly.”

►“If the government decides to proceed with reforming the rules, any proposals will undergo a full consultation so that interested parties can contribute their views for consideration.”

►The detail and timetable for further consultation will depend on the outcome of the discussions HMRC will have with stakeholders following publication” of the discussion document.

►The confidentiality status of comments / responses that contractors and all other taxpayers send to HMRC is detailed on page 10 of the discussion document.

►Comments to HMRC can be emailed to [email protected] no later than the end of September 2015.