IR35 discussion document may not bring relief for contractors
As ever, any announcement about plans to review, reform or implement any changes to the IR35 legislation are met with mixed reactions from those who are forced to try and understand them in order to comply with them. Whilst the IR35 discussion document is still open for responses until the end of September, it still may not address the inherent imbalance in the way the tax system treats contractors who are sole traders versus those who are incorporated.
There is an understandable desire on the part of HM Revenue and Customs to ensure that self employed individuals are not allowed to be in disguised employment in order for either the employer or the employee (or both) to benefit financially from an unfair advantage. However, there is a very real concern that sole traders who have incorporated for genuine reasons will be penalised purely because others abuse the system.
For many, the decision to incorporate is made for legitimate reasons, and in many cases contractors choose to do so in order to work with larger businesses which deal largely or solely with limited companies and are hesitant about working with sole traders. HMRC conduced their own study which showed that limited company status was one of the main reasons that independent professionals chose to register rather than the tax benefits which are also on offer.
Although many limited company contractors are aware of the potential tax benefits of limiting their liabilities, there is little evidence to suggest that any more than a small minority of those who do so are doing so to enable them to disguise their employment as the IR35 rules appear to suggest. With the UK’s flexible workforce providing an invaluable service which is strengthening the UK’s economy, it is important that the government does not tax them disproportionately in an attempt to clamp down on a minority who are abusing the system.
If you want to know more about how to organise your business, then this information about working through a limited company could help, as could our guide to IR35. Our free contractors’ guides also provide a range of advice and information for anyone considering a career as an independent professional.
For more detailed advice specific to your situation, our experienced accountants are always on hand to help you save time and money so call us today on 01442 275789 or email email@example.com.