Government launches new office to review IR35

The newly launched Office of Tax Simplification (OTS) has been tasked with reviewing IR35 "as a priority".

The new body is expected to report its recommendations to the Chancellor prior to the 2011 Budget, following a consultation period.

The OTS has been asked to:

• identify and provide evidence of the complexity and uncertainty created by IR35;
• consider alternative legislative approaches that would be simpler and create certainty while ensuring that, where intermediaries are used to disguise employment, any income that is effectively employment income is taxed fairly; and
• consider the scope for tax avoidance and the extent to which alternatives to IR35 would affect it.

Clearly, this is good news for the contracting industry, as IR35 has caused so much uncertainty for contractors and service providers alike over the past decade. However, the Government wants any changes to be "revenue neutral", which means that any revenue lost via changes to the current IR35 rules will presumably have to be found elsewhere.

Despite optimistic claims within the contracting industry, IR35 cannot be abolished in isolation, and for now - nothing has changed.

We recommend that contractors submit all contracts for review with an IR35 specialist, and consider taking out IR35 (tax investigation) cover just in case.

For more information on IR35 contract reviews, and insurances, visit our online shop.