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Autumn Statement 2012 – What about IR35?

Following the introduction of new IR35 enforcement measures in May 2012, and ongoing efforts to clamp down on personal service companies in the public sector, it may come as some surprise that only a few lines in the supporting Autumn Statement documentation even mention ‘IR35’.

Not since the introduction of the Intermediaries Legislation in 2000 has ‘disguised employment’ been such a hot issue – with the off-payroll audit into public sector remuneration following the Ed Lester affair, followed by the introduction of new IR35 compliance rules for public sector contractors, a new business entity test to work out your risk of being selected for an IR35 investigation, and proposals to tax ‘influential’ consultants at source.

Although many sections in the supporting documents are dedicated to anti-avoidance measures, just one relates to the ‘taxation of controlling persons’, which would have forced end-clients to tax senior consultants at source.

The Government has decided to ditch this controversial measure – seen by many as completely unworkable, certainly in the private sector.

As many industry experts pointed out at the time, the IR35 rules already exist to deal with cases of disguised remuneration, and the Government now seem to believe that HMRC’s new approach to policing IR35, alongside the new public sector compliance rules, rule out the need for further legislation at this time.

Ominously, section 2.103 leaves the door open for further disruption to come – “…the Government is strengthening the existing intermediaries’ legislation (IR35) to put beyond doubt that it applies to office holders for tax purposes.”

In a related story, industry site, ContractorCalculator, revealed today that a mere 193 new IR35 investigations have been opened since the IR35 regime was given an overhaul in April/May 2012, but told our sister site, Contract Eye, that contractors shouldn’t be complacent about complying with IR35.

You can read our summary of the main points announced in today’s Statement here.

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