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IR35: Lords Critical of HMRC

The report on Personal Service Companies from a House of Lords Select Committee was released today. A notable and perhaps surprising theme was the repeated criticism of HMRC throughout the report.

 The Lords agreed that suspension or abolition of IR35 would be ‘attractive’, but would not be feasible if HMRC are correct in their claims that the legislation acts as a preventative force – i.e. contractors are put off incorporating limited companies because of the risk of IR35.

The big question is whether the amount of tax ‘protected’, and the actual yield from enquiries, outweighs the cost of policing maintaining IR35.

The Lords’ recommendations can be seen here, and the full report is here.

The report will almost certainly prompt some fairly significant changes to the legislation and the guidance surrounding it. We will have to wait and see whether these will ultimately be of benefit to contractors.

 

By Seb Maley

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