IR35 discussion document

20 July 2015

As announced in the Summer Budget a discussion document has now been published to look at reforming the legislation on intermediaries.

IR35 legislation exists to ensure that those who work through intermediaries – usually Personal Service Companies – but who would have otherwise been direct employees pay broadly the same amount of income tax and National Insurance Contributions as direct employees.

As the Summer Budget set out, government believe there is widespread non-compliance with the current rules and reform is needed to improve the effectiveness of the legislation. The government recognises that many individuals choose to work through their own limited company. However, where people would have been employees if they were providing their services directly, anti-avoidance legislation commonly known as IR35 (introduced in 2000) requires that they pay broadly the same tax and National Insurance as other employees.

As highlighted by reports from the Office of Tax Simplification and the House of Lords, it is clear that IR35 is not effective enough. Non-compliance in this area is estimated to cost over £400 million a year. The government wants to find a solution that protects the Exchequer and improves fairness in the system. This discussion document has been published to start dialogue between HMRC and stakeholders on the best way to reform IR35 legislation.

HMRC are looking for comments by the end of September 2015.

CIPP comment

The Policy Team will be involved in discussions with HMRC and other stakeholders and will publish a survey if deemed appropriate over the next few weeks.