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Government needs to come clean on IR35 changes, ARC says

The government has to come clean and delineate the changes being instituted to IR35 this April, says the Association of Recruitment Consultancies.

The staffing body recently heard from quite a few organisations that had concerns about the new changes to the ‘disguised employment’ tax avoidance rule and has responded by stating that the government has a responsibility to provide more transparency regarding their plans for the tax rule, lest it have serious consequences for too many contract workers in several business sectors. In fact, ARC chairman Adrian Marlowe went so far as to say that the current IR35 proposal is unsuitable in its current condition, as it is simply too broad and will only serve to create a potential tidal wave of new IR35 investigations.

The government has had a bee in its bonnet when it comes to IR35 ever since the Student Loans Company chief executive, Ed Lester, became the centre of controversy earlier in 2012 for using a personal service company to great effect in avoiding his due share of taxes. This has led policymakers to focus instead on interim workers or contractors that are understood to be ‘controlling persons’ of a personal service company, but critics say that the new IR35 rules to be implemented would see nearly every honest freelancer working a public sector contractor to fall within the scope of IR35.

Many employment and taxation experts speaking with ARC are concerned that the new rules will have a chilling effect on the freelancing sector in the UK as overseas contractors will be seen as cost-effective solutions. Others fear – and perhaps rightly so – that the number of IR35 investigations will generate so much in costs to effectively hamstring economic growth in a time that is still experiencing serious repercussions from the 2008 credit crisis.

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