IR35 – Success or Disaster?

1st November, 2015

With the 25th November’s Autumn Statement fast approaching it seems the avalanche of hearsay and rumours shows no signs of slowing down.

As always everything centres around IR35 and how best to depending on ones terminology enforce, administrate or police this ruling. No matter how many legislation changes have been made in the past, it seems there will forever be something that needs to change.

It got me thinking, has IR35 ever been a success or has it been the disaster that seems to be so freely attached with the mere uttering “IR35”?

In its most simplistic design IR35 was introduced to stop contractors who were “disguised employees”, and thus subject them to the same Tax and NIC’s as permanently employed individuals. To actually be a ruling that defined whether you were “employed” or “self-employed”.

So has IR35 been a success or has it been a disaster? Yes I know there are many other areas that can be discussed, but I just want to actually measure the success or failure on one thing, which was the sole intention of the introduction of IR35, and that was to ensure that the Treasury was not losing out on £millions and £millions in Tax and NIC’s.

Quite simply since April 1999 there are 100’s and 100’s of Umbrella and Payroll Companies in the marketplace. The majority of which (there will always be a few who let our market down and do things incorrectly) are paying Tax and NIC’s directly to HMRC.

Indeed I remember the early 2000’s when speaking to Contractors who would tell me “I took home well over 80% of my income pre IR35”, and these were contractors earning over £100,000 in some cases.

That all stopped with IR35, and actually the focus has shifted so ridiculously to why IR35 is failing that Government and HMRC have lost sight of the fact that IR35 has been a huge success to them from a monetary level. A simple question to you powers that be in Government and HMRC, how much Tax and NIC’s did you receive from the contract market pre IR35? And since?

As the phrase goes “Greed Kills”, lets hope that the Government see sense and actually look at the success IR35 has been to the Treasury and not become so blinded by greed that they kill the contract market as we know it!!