IR35 review won't conclude until 2011

Measures to replace the unpopular IR35 legislation will be difficult to draw up and will not be proposed by the Office of Tax Simplification until next year's Budget, its new director says.

John Whiting, tax director for the OTS, also told ContractorUK that measures to replace IR35 may need to consider a contractor's income sources, akin to Australia's retired '80-20' rule.

The former PwC partner was speaking yesterday, after accepting the unpaid role at the independent body which will review the myriad of tax reliefs and exemptions for its first task.

Once the remaining staff positions at the office are filled, it will then conduct a full review of small business taxation, which Mr Whiting confirmed would include IR35.

He told CUK: "[IR35 is] a complex area - so I can't promise immediate change or abolition. If [either were] easy to do, they would have been done already."

"We may have to go for more of the '80/20' approach but let's see where we get to. What I want...is a thoroughgoing review - not just another bit of sticking plaster."

To this end, Mr Whiting said the OTS would need to consider why IR35 was brought in; whether the "problem" it addressed remains and, if so, how to respond to it better.

"HM Revenue & Customs are doing some initial work on [IR35], but our target is to come up with recommendations in time for the Budget next year," he said.

The OTS, which he will co-run with its chairman Michael Jack, an ex-Tory Treasury minister, will report to the exchequer secretary David Gauke, or to the chancellor, George Osborne

"They will be able to accept or reject our reports because ultimately they have the responsibility for the tax system," said Mr Whiting, pointing to the two ministers.

"But I would hope that if we do our job properly, our recommendations will be easy to follow; and if they do reject unreasonably, they will get lots of questions as to why."

Wednesday 21st July 2010