Contractors will see no changes to IR35 between now and at least April 2017, ContractorCalculator has learned.
HMRC confirmed at the most recent IR35 Forum meeting on 15 December 2015 that no kneejerk measures will be implemented between now and the next Budget.
HMRC was reluctant to provide any timescale with regards to its next decision over the legislation, but it has confirmed that there will be no changes to IR35 included in the Finance Act 2016, meaning no new measures will take place during the 2016/17 tax year.
Many of contracting’s stakeholders were at the meeting of the IR35 Forum when HMRC announced its decision, including the Association for Independent Professionals and the Self Employed (IPSE). IPSE ran a high profile campaign opposing rumoured changes to IR35 during the build-up to the Autumn Statement.
“We’re pleased that our efforts, alongside those of numerous other groups and hundreds of thousands of contractors, have helped to convince the Government to go back into listening mode. Clearly the message got across that the approach HMRC was considering wasn’t the most appropriate one,” an IPSE spokesman told ContractorCalculator.
HMRC published its Intermediaries Legislation (IR35): discussion document in July 2015, which attracted 160 written responses – including one by ContractorCalculator - whilst the Treasury also held 14 roundtable meetings.
Proposals to force clients to take responsibility for IR35 compliance were widely criticised. The ambiguity over the ‘supervision, direction or control’ (SDC) test and the Treasury’s miscalculated attempt to ‘level the playing field’ between contractors and employees were also highlighted.
Concern amongst contractors that IR35 was going to be overhauled had been high since the Summer Budget, whilst fears were compounded when media outlets reported details of a rumoured one-month contract limit prior to the Autumn Statement.
However, this outcome suggests that the government is reverting to a more structured and considered approach to IR35.
Contractors will be equally pleased to hear that HMRC intends to consider findings from the Office of Tax Simplification (OTS) cross-government working party on defining self-employment, which looks likely to eventually provide a steer on HMRC’s plans for IR35.
This comes after ContractorCalculator also made representations at round table events and a formal response, highlighting that HMRC didn’t have sufficient data to justify its proposals.
The OTS cross-government working party is currently waiting for input from two reviews into self-employment and entrepreneurship. The former by Julie Dean and the latter by Michelle Mone.
“The outcome is certainly significantly better than many contractors were anticipating,” notes ContractorCalculator CEO Dave Chaplin.
“It looks like the Treasury may be considering the significant tax yield generated by the changes to the dividend tax before making any further decisions over IR35. Whether or not a consultation will take place before April 2017 remains to be seen.”
HMRC has also confirmed that it is set to look into improving its Employment Status Indicator (ESI) tool to provide the public with a much more reliable way of assessing their employment status.
Contractors keen to determine their current IR35 status can use ContractorCalculator’s free online IR35 test.