IR35 stays put after hopes raised of repeal

March was a month of highs and lows for contractors and their tax affairs.

In the first half of the month the Office of Tax Simplification (OTS) released its review of small business taxation including IR35. The report had been eagerly anticipated by the contracting community and particularly the Professional Contractors Group, which has long campaigned heavily for IR35’s abolishment. And it seemed that the battle was almost won. The first proposal for IR35 was its suspension with a view to eventual permanent abolishment. Perhaps through rose-tinted spectacles, this was hotly greeted by many, apparently neglecting that it was just one of three possible options.

When the big day came on 23rd March, the Chancellor dashed the hopes of the contracting community, opting instead for something entirely different. Instead of suspension or abolishment, IR35 would be retained in its current form, but improvements would be made “in the way IR35 is administered”.

Full details of these planned improvements have yet to be published. What is clear however is that IR35 will continue to apply and will continue to expose contractors to additional tax liability where their contractual and/or actual arrangements suggest a relationship akin to one of employment. Contractors should therefore continue to be impressed by an agency that takes care to structure engagements and contractual documents correctly.