Contractors working under constant fear of changing tax rules can relax – for a while at least. The government has announced IR35 rules will not change until April 2017 at the earliest after months of rumours about the tax law. HMRC confirmed at the most recent IR35 Forum meeting on 15 December 2015 that no measures will be implemented during the 2016/17 tax year.
IR35 was introduced a decade ago by Labour with the intention of levelling the playing field between contractors working for their own companies and employees, as contractor companies provided opportunities for tax breaks that are unavailable to other workers. Many of contracting’s stakeholders were at the meeting of the IR35 Forum when HMRC announced it’s decision, including the Association for Independent Professionals and the Self Employed (IPSE).
“We’re pleased that our efforts, alongside those of numerous other groups and hundreds of thousands of contractors, have helped to convince the Government to go back into listening mode. Clearly the message got across that the approach HMRC was considering wasn’t the most appropriate one.” an IPSE spokesman told Contractor Calculator.
Proposals to force clients to take responsibility for IR35 compliance were also widely criticised. The ambiguity over the ‘supervision, direction or control’ (SDC) test was also highlighted. There has been concern amongst contractors since the Summer Budget that IR35 was going to be overhauled and fears were compounded when media outlets reported details of a rumoured one month contract limit prior to the Autumn statement. HMRC has also confirmed that it is set to look into improving it’s Employment Status Indicator (ESI) tool to provide the public with a much more reliable way of assessing their employment status.