Can the Government find a simple way for taxation IR35 Contractors?

The Government is considering changes to the IR35 regulations that could have a significant impact on how workers are paid and what tax is deducted. This may make it increasingly difficult for contractors to make the sizeable amounts they have been enjoying for many years.

It seems the Government is increasingly wanting to shift the burden of IR35 Contractors onto the firms they work for or the agencies by forcing them to tax the way they see fit. This will cause chaos when it comes to accounts and tax returns as the official figures will be different to what the client has submitted or indeed invoiced to the agency or organisation.

In addition agencies will simply say their contractors are not under any laws set by the Government and will set their own rules, adding to the mess.

It seems the Government is not being forthright with any radical changes and is simply trying to fix a broken system. Continually adding changes to the IR35 Contractor regulations will certainly not give any certainty to existing contractors and will create further problems for accountants trying to clear up the situation.

You can download the notes on the discussion here

Interestingly the document tells us quite a telling issue of the government is wanting to remove the “confusion” of IR35 for those wanting to work under the scheme:

the incentives for individuals to work through companies when they would otherwise be employees, and for businesses to engage individuals through companies, even if they are working in a similar way to their employees. It is this unfair manipulation of the rules that IR35 was introduced to address. These incentives to disguise employment by working through a PSC have increased over recent years as NICs rates and the Personal Allowance have increased and Corporation Tax rates have fallen. Some stakeholders have told us that recent changes to tackle false self-employment and the use of offshore payrolls to avoid employment taxes have also added to the incentive for those looking to avoid employment taxes to work through PSCs to disguise their employment. As shown below, those who should but do not operate IR35, can unfairly gain a substantial tax and NIC advantage.

 

Are you a contractor? What are you worried about with regards to your working regulations and what tax you may have to pay?