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IR35 compliance to remain a problem for contractors

There’s much to rejoice about in Chancellor Osborne’s Autumn Statement, but there seems to be no IR35 compliance relief in sight for contractors, experts say.

The current state of IR35 regulation is ‘sufficient’ in preventing tax avoidance from cases of disguised employment, according to the government, especially when the new public sector measures instituted earlier this year are taken into account. However, industry experts take issue with this characterisation, even while the principles of the announcement are sound.

PCG managing director, John Brazier, spoke out on the issue recently, remarking that it is true that the purpose behind IR35 regulation is indeed to find those disguising their employment through purporting to be a contractor and that additional legislative action is not needed, but there are serious flaws in the regulations as they stand. While the situation may not be ideal, Mr Brazier said, at least the government isn’t making matters worse by burdening contractors even more with Byzantine red tape to cut through.

New IR35 guidance that was published this summer, which was purportedly made in order to make it less difficult to understand and comply with, came under harsh cricitism because many contract working experts classified the new guidance as nearly worthless because it just complicated matters even worse. In fact, under the new guidance, many contractors may end up mis-classifying themselves as susceptible to an IR35 investigation even when they would not have been prior to the publication of the guidance.

However, it was pointed out then – and is just as valid now – that the law as not changed in any way, shape, or form when the new guidance was published. This means that contractors may be a bit frustrated by the confusing guidance, but that their danger of being classified as being in disguised employment is still unchanged.

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