OTS offers the Chancellor three Interim IR35 options
The first option, suspending IR35 altogether, has so far been widely criticised by many within the contracting community as it is believed that there would be a huge surge in the number of incorporations (by contractors currently using umbrella structures) and a significant loss of revenue to the exchequer. The OTS has suggested that the Government would retain a ‘trigger mechanism’ to un-suspend IR35 if wholesale avoidance occurred, something that would lead to even more uncertainty.
Enforcing IR35 more effectively
The second option is for the Government to retain IR35 in its present form however the HM Revenue & Customs would need to make changes to the enforcement of the legislation, including;
- Publishing new simplified guidance on IR35
- Encouraging use of the HM Revenue & Customs Employment Status Indicator tool
- Setting a maximum investigation timetable of 12 months
- Creating a preferred supplier list of IR35 contract reviewers whose opinion would be accepted by HMRC investigators
- Introduce an Independent mediation partner
The aim of the change is to help contractors self certify whether they are inside or outside the legislation leading to efficiency and cost savings for the HMRC.
Leaving IR35 as is with the exception of including a new ‘In business’ test
A new ‘In business’ test would be added to existing IR35 system. The aim would be to exclude 90% of genuine businesses, allowing the HMRC to apply IR35 as it currently stands to the remaining 10%.
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