Umbrella company contractors may start to see the results of the Office of Tax Simplification’s work on IR35 as early as April 6th.
The OTS has been working on ways to simplify the IR35 regulations that have been burdening down contractors in recent years. One of its major recommendations is to put an end to the in and out system whereby contractors are deemed outside the regulations on one contract, inside it on the next and then outside again.
The Office recommends the Revenue should look at the way a contractor normally works rather than interrogating every single contract. HMRC should be targeting those individuals who are disguised employees but operating out of their own personal service companies.
If the government accepts the recommendation, contractors who work from place to place and would normally fall outwith IR35 will not be troubled by the Revenue. HMRC will accept that they are self-employed even if the occasional contract does not fulfil all the criteria.
However, those who remain with the same company for a long time could be thought of as disguised employees. This could be a lifestyle choice and therefore the way of working will need to be looked at.
Of course, there is no guarantee that the government will accept this recommendation. The OTS recommended the retention of IR35 and that was acted upon, but this new recommendation veers in the opposite direction. We’ll probably have to wait until Budget day to find out!
© 2012 All rights reserved. Reproduction in whole or in part without permission is prohibited.
Image: DSC_0096 by RBStevenson
