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The Office of Tax Simplifications (OTS) have announced that an initial report to summarise their findings on improving small business taxation, in particular the IR35 rules, will be released in time for the chancellor’s statement on March 23rd.
Following last year’s election, one of the first tasks the Coalition Government carried out was the creation of an independent body, OTS, to advise on how to simplify the way small businesses are taxed.
Although this report is set to offer some initial suggestions, Director of OTS John Whiting comments, “On IR35, we want to come up with recommendations for improving what is generally agreed to be an administratively burdensome regime. Post – Budget will be following up towards a final report in the summer.” Contractors will have many more tax quarters to wait until there are final details on a ‘successor’ for IR35 despite hopes dating back to April 2010 that the coalition government was poised to scrap it outright.
Managing Director of SJD Accountancy, Simon Dolan, commented “I think that the OTS will finish their report towards the end of this year, then they’ll announce any proposed changes to IR35 in the Pre-Budget report 2012, with a view to implement them in the Budget 2013.”
In order to identify several initial areas to tackle, OTS road-shows took place throughout the UK providing a forum for tax agents, accountants, businesses and the public to air their views on how Britain’s tax code could be simplified. Commenting on this, Mr Whiting reflected: “Some of these points we had already identified, but we are now fully aware of these opinions, and will be making our recommendations in the report. Clearly, we aren’t going to be able to meet everyone’s wishes”.
Hoping to ease some of the burden quickly, the office has stated that although they are aiming for long term options in tax simplification, they will not shy away from ‘short-term’ actions. It may be that alternative administrative options may ease the burden and create an effective IR35 solution for a period of time, but commenting on long term options Mr Whiting stated “The government is committed to full consultation on changes,” he stated. “So if, say, we recommend a significant change to the IR35 rules, then it will presumably be a while for debate before the change comes through into law.”
Please see our plain English advice on IR35.
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