The REC has written to the chairman of the Office of Tax Simplification highlighting the importance of a comprehensive review of the IR35 regulations.
Jeff Brooks, the chairman of the REC Technology Group, pointed out that the work of the new office will have a huge impact on the contractor marketplace. The REC intends to work closely with the government and the OTS by contributing to the reviews and helping to streamline the current regulations for those working in the freelance market.
The chairman of the IMA, Paul Botting, welcomes the review saying it is long overdue and should help to simplify the options for flexible working. IT contractors, interim managers and executives are vital for growth and efficiency and they should not be burdened down with a complex tax system.
Gordon Brown proposed IR35 in the 1999 budget in a bid to stop ‘disguised employment’, the practice of receiving payments from clients via a service company. This avoided tax and National Insurance Contributions as individuals then pay themselves in dividends. However, the system has become notoriously complex for both contractors and organisations.
The IR35 legislation has often been attacked by groups such as the PCG, which say it is restrictive and vague. One of the major issues with the current system is the need to determine a workers employment status. It is hoped that the new regime will simplify this requirement and identify feasible ways to bring certainty to contractors and organisations.
John Whiting, the tax director for the OTS, has warned people not to be impatient. It will take time to come up with a feasible alternative to IR35 due to the complexities of the current legislation, he said. Proposals for change will not be put forward until the 2011 Budget and at that time the Government will have the opportunity to either accept or reject the recommendations of the OTS.
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