IR35 review told to forget 'one-size fits all'

Contractors will welcome changes to IR35 but not if reviewers of the “cumbersome” legislation propose a new ‘one-size fits all’ approach in its place.

Stuart Davis, chairman of the Freelancer and Contractor Services Association, spoke of his concern earlier this month following a meeting with the Office of Tax Simplification.

He told OTS officials tasked with reviewing IR35 that, while it was clear that contractors would welcome its simplification, a poorly drafted replacement could penalise all flexible staff.

“[There is] ongoing uncertainty about the tax regime as it applies to the flexible workforce,” Mr Davis said. “Simplifying IR35 must not mean a constrictive ‘one-size fits all’ approach.”

He was joined at the meeting by the boss of contractor accountants’ Brookson, Martin Hesketh, who said the uncertainty of IR35 for contractors centred on “being captured by it or not.”

The lack of clarity in the legislation also makes contractors unhelpful to their clients, he added, as contractors often object to training schemes on the hope it might help demonstrate an outside IR35 position.

Other pointers to the OTS – on preferred ways of contracting and how changes to the tax regime could help and hinder their operation, came from contractors themselves.

Invited by the two industry groups, the contractors gave the officials “full and frank” accounts, which Mr Davis believes resonated well with the review team.

He said: “When government officials hear directly from contractors about how changes to IR35 will impact on their working lives, tax reform stops being just an academic exercise – it becomes real.”

Tuesday 21st December 2010