IR35 is now 12 years old and still the arguments rumble on about whether or not it is fair and should it be abolished. These are common headlines from the various lobbying groups, but are these concerted efforts acting in the best interests of the contractor, whose main objective is to earn a living?
For my sins I started out life working for Hector; in 1990 I realised the grass was greener on the other side of the fence and felt that I could put my skills to better use defending taxpayers against an enquiry. I now have over 35 years’ experience in dealing with HMRC enquiries so there is not much I haven’t seen. I have genuine sympathy for the plight of contractors who have unwittingly been subject to a world of uncertainty through no fault of their own.
IR35 was first announced in 1999 and came into being during 2000 with the sole objective of flushing out those contractors who were really 'disguised employees'. The tests applied were not new; the old PAYE enquiries applied the very same tests to decide whether or not self-employed individuals were genuinely in business on their own account. There was no doubt that the system was being abused and for this reason HMRC had to do something. There were examples of self-employed shelf stackers working full time for a well known supermarket.
Clearly there was a commercial need for businesses to have more flexibility in the way they employed their work force. This was partly fuelled by the worsening economic crises and the over-stringent employment law legislation. The question, I guess, is did IR35 do its job? In the main I would say yes: it provided guidelines that would be applied to help contractors assess whether or not they were genuinely in business on their own account. As with any new legislation this needs to be tested and, where necessary, precedence may need to be established in the courts.
So is it right for the lobbying groups to call for it to be abolished? I would advocate a resounding no. IR35 has provided some clarity and as long as all parties to the arrangement understand their obligations contractors who are genuinely in business on their own account should be able to operate with confidence through their own Personal Service Companies. There are some very good advisors operating in this market sector who will understand the issues and dilemmas contractors are facing. Further comfort can be gained from the array of insurance products specifically designed for contractors that offer that piece of mind to enable a good night’s sleep. If Hector does come knocking on the door you know there are specialists like me who can help.
In the main IR35 is a simple solution designed to protect the contractor who is genuinely in business on their own account. The self-employed shelf stackers generally now work through agencies and are paying PAYE as they should. I would therefore recommend caution when looking for change: the current solution is workable if contractors seek the right advice and properly look after their affairs. The old saying ‘the devil you know’ is very apt. Be careful what you wish for.
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