HMRC should focus on detecting genuine cases of disguised employment rather than jumping to the conclusion that all freelancers are subject to IR35 rules, according to the REC.
Jeff Brooks, the REC’s Technology Group chair, stressed the importance of focusing on the rare instances of real disguised employment. He said it was essential to ensure the majority of contractors and umbrella companies do not have to worry about the possibility of an HMRC investigation or a tribunal that could drag on for several years.
The REC is a member of the newly created IR35 Forum which was set up after George Osborne decided to retain IR35 but improve its implementation.
Mr Brooks pointed out that the rules surrounding IR35 are unnecessarily complex and have created unnecessary uncertainty which has made the system unacceptable to both recruiters and contractors. The ambiguity and complexity of IR35 has also led to tax officials spending countless wasted hours on cases that do not fall within the scope of the legislation.
Last week, David Gauke, the exchequer secretary, outlined his commitment to improving the onerous legislation.
He started off by saying that HMRC is committed to overhauling the way IR35 is administered in order to address the concerns of the contracting community. He went on to say that the government has to get this right if taxation is going to be fair and allow contractors to provide their services in an appropriate way.
Chris Bryce, the chairman of the PCG, said he was pleased that the exchequer secretary had recognised the difficulties IR35 had caused freelancers over the last 11 years.
The IR35 Forum will give us chance to make a real difference and the PCG takes the challenge very seriously. We are determined to make HMRC clean up the administration of IR35 and provide clarity, consistency and transparency for all our members and the freelance community as a whole, he added.
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