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HMRC says it may turn down IR35 Forum suggestions

While Her Majesty’s Revenue & Customs is working closely with the IR35 Forum to review the disguised employment rule, it says it has the final choice in policy.

Well there’s nothing quite like knowing all your hard work could be for naught: while the IR35 Forum has been working day and night to go over policies ahead of the upcoming review, the taxman recently said that while the Forum’s policy suggestions are welcome it’s ultimately up to HMRC whether they’re going to be implemented – and that these suggestions need to be to the tax authority’s liking in order to get its imprimatur.

IR35 has been a thorn in the side of freelancers and contractors for years now, especially since the rules are supposed to provide a framework for determining if an employee is dodging his or her tax responsibilities by claiming to be an independent contractor instead. Poor guidance has seen all too many legitimately self-employed Brits raked over the coals under IR35, and I for one am keen to see the rules change to make this less common – and the IR35 Forum is largely behind the idea of reducing freelancer liability as well. Despite this, if HRMC wants to continue targeting contractors it’s going to – and that has me more than a little worried.

The IR35 Forum has been forthright in telling the taxman that better guidance is needed on IR35. Of particular note is the way employment status is determined; the forum suggested that HMRC handle this on a topic by topic basis. This is only one of the 13 separate recommendations the IR35 Forum has already made to the tax authority, but HMRC says that it would rather push for making its Employment Status Indicator the primary tool in determining employment over a wide variety of situations – and that IR35 cases would be no exception to this rule. Still, the taxman did agree that the employment status guidance for IR35 needs to be updated and reviewed on a regular basis.ome.

The tax authority says it wants to provide the best value for money for British taxpayers when it comes to IR35. If you ask me, the best way to do this is to put in some provisions to ensure that legitimate freelancers and contract workers aren’t targeted so much by disguised employment investigations; even if a contractor defends such an inquiry successfully, the costs incurred in doing so can be crippling.

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