OTS stops short of IR35 abolition

Posted by PM | on Thu, 10/03/2011 - 15:57 3515 3 comments

The Office of Tax Simplification (OTS) has published an interim report looking at small business taxation that puts into question the future of IR35.

In its Small Business Tax Review the OTS has called on Treasury to suspend IR35 or compel HMRC to make changes to its implementation until wider structural reform is introduced.

If an integration of National Insurance and Income Tax goes ahead, the IR35 legislation - which stipulates employment income through the use of intermediaries - would effectively be redundant.

However, the report does say that until this happens the government should consider suspending it with a view to abolishing it or make specific changes to its enforcement.

Simon Sweetman has outlined the options:

Continued...

Go Back

johnjenkins | Mon, 14/03/2011 - 21:06 | Permalink

to the days before GB.

Although the system wasn't perfect there was room for tax payers and HMRC to manouver.

Nowadays with penalties for coughing, niether side can be flexible. In short we have compliance and rigidity instead of common sense and flexibility.

The abolition of IR35 will not make any difference as it is already dead and buried.

OTS interim report

gerryhart.tax | Thu, 17/03/2011 - 15:29 | Permalink

They have published their interim report on simplifying the tax system for small businesses, and the likely response is a feeling of disappointment that so few specific ideas are being put forward. To be fair, the OTS makes it clear that they now seek the Chancellor’s views and further instructions, and they also ask for views to help them develop their final report which is due later this year, but even so one could have expected more to come out at this stage. They do advocate a merger of NIC with income tax, and indeed it would be an honest move as NICs are really a tax under another name. But would any Governement really go for that, given that it would mean admitting that the top rate of tax is not 50% - it's 66%! There is consideration of a simpler tax regime for very small businesses with turnover below £20,000, and the future of IR35, but the tone of the report does not suggest the existence of any real commitment to simplify. Indeed, does it not suggest there was hardly a meeting of minds within the OTS deliberations? Let us hope that this will not turn out to be an opportunity missed, but it does not look promising.

Gerry Hart

With or without employers' NI ?

mikewhit | Tue, 22/03/2011 - 12:40 | Permalink

"the top rate of tax is not 50% - it's 66%! "

Is that for someone under IR35, or not.

If that figure is non-IR35 then of course the top rate of tax is considerably more, for those under IR35.