IoD Submits Proposals on Changes to IR35
The IoD (Institute of Directors) has called for the reform of IR35. It claims that it has not been working as the right solution to address the issue for which it had been designed.
IoD has described the IR35 as a ‘serious problem’ in a report it has submitted to the OTS (Office of Tax Simplification). The reason why it has done so is largely because it has found that it is difficult to determine whether or not someone is self-employed by applying the employment status tests.
The IoD has said that this puts pressure on both the HMRC (HM Revenue and Customs) and individuals as it is ineffective. Also, it has pointed out that many current inquiries do not result in extra tax being paid.
The IoD has further added: “The introduction of the managed service companies legislation means that IR35 has turned out to be ‘a bad solution to a problem that has shrunk.”
It has said that the underlying issues are not getting solved and it requires a different kind of approach to make it happen.
The IoD has also submitted proposals regarding what is the best way to take care of the defects in the system.
The IoD has proposed that an initial automated test can be adopted. The aim would be to reduce the populations which the HMRC will have to enquire about. It will also be possible to exempt as many people as possible from detailed checks.
The submission by the IoD has said that “it is only arguing for the framework, with a sequence of tests and of tax treatments”.
It also says that the precise contents would be decided upon only after consulting extensively with those persons who would be affected by the change.