IR35 political football: A game no one wants to play
Tories shy away from committing to scrap the controversial legislation – but a long overdue review is on the cards.
The perennial flashpoint that is IR35 reignited this week after a Conservative official rubbished suggestions that the party would scrap the controversial legislation if it gains power at the next election.
An article on Contractor UK quoted an unnamed Tory spokesperson who said that revoking IR35 “would not resolve many of the issues around the taxation of small businesses”.
The party official's email continued: “Indeed it would, on its own, be the same piecemeal approach which has failed under this government.”
Simon McVicker, head of public affairs at the Professional Contractors’ Group (PCG), responded: “We are surprised that one e-mail from an unnamed Conservative source questions the real progress made in a series of long and fruitful talks PCG has had with a Conservative team, led by senior frontbench spokesmen. The message we are getting, underlined in the recent statement from shadow business minister Mark Prisk, is a much more positive one. This is a sensitive issue and exceptionally important to PCG’s 20,000 members; for their sake it is important we get a fair and amicable resolution to this piece of unfair and unworkable legislation that is IR35.”
Earlier this year, Prisk said the party would commit to a fundamental review of small business tax, including IR35, under the remit of a new Office of Tax Simplification.
He wrote in a letter to the PCG: “We recognise and value the contribution of freelancers and we are well aware of the way in which the current government has treated them. We want to deal with this problem comprehensively, in a way which provides us all with a lasting solution, not a short term fix.”
It’s worth noting that at no point did Prisk or any other Conservative MP commit to scrapping IR35 – at this stage a review of the rules is all that’s on the table and that’s highly unlikely to change according to many commentators.
While it might not be scrapped altogether, there could be a change of emphasis within HMRC over the coming years, predicts Matt Boddington, tax adviser and managing director of Accountax. “IR35 is a little less relevant today than it was when it came in back in April 2000”, he said.
“It’s likely that it will still be around for quite some time, but perhaps the number of cases prosecuted by the Revenue will dwindle over time. IR35 is quite a resource intensive compliance activity for the Revenue to undertake. With increasing pressure on resources, the Revenue may choose to focus on activities which are less resource intensive and generate a higher yield.”
While IR35 remains a burning issue for freelance contractors and the accounting community, perhaps the issue is too niche to generate wider political debate. AccountingWEB asked the three main parties to confirm their positions on IR35, but none have responded.
“Most people won’t have heard of it unless they’re a freelancer or tax adviser,” noted Boddington. “Issues like married couples' allowances, benefits or putting a percentage point on National Insurance are more likely to hit the headlines,” he added.
Perhaps it’s a commitment too far to expect any of the parties to take a definitive stance on IR35 so close to an election – after all there are so many babies to still left kiss on the campaign trail.
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