IR35 analysis: ‘Uncertainty in the evidence base’
A leading tax expert called for clarity over the rationale behind IR35 yesterday, as a Lords committee’s call to re-examine the “longer term case” for combining taxes on income and NICs was backed AccountingWEB members. Andrew Goodall reports.
Patrick Stevens, tax policy director at the Chartered Institute of Taxation, told AccountingWEB: “At the moment it seems to be that if the relationship between the person doing the work and the end user would be employment if there were no entities in the way, then the total amount of tax and NICs to be paid should be the same as if there were no entities in the way. That is what IR35 aims to achieve. If this policy is to remain the same the only question is how to enforce it better.”
He added: “If the intention is to change the policy so that inserting a company in this situation will change the basis of taxation as though someone were effectively self-employed, then everyone should be entitled to that and all employees who set up such a structure can have a more favourable tax position.”
Commenting on yesterday’s report on AccountingWEB, Tonyleigh said the real purpose of IR35 was to stop contractors paying themselves dividends free of NICs. Rather than do this by changing the NIC rules, he suggested, the government had introduced “the cack-handed employment status tests we have today”.
GazCol said IR35 had been “manipulated into something far above and beyond what it was ever intended to resolve”, but Ringi argued that removing it would “send a signal that anybody could avoid having to pay NIC by using a company”. The only sensible option was to combine income tax and NICs.
Peers called on HMRC to do “more robust work” to show that revenue protection provided by the IR35 regime outweighs the cost of the legislation...