Contractors could be forgiven for thinking that the IR35 Forum is making little progress and won’t make one jot of positive difference when it does. Apart from the meeting minutes in HMRC-speak and the odd unhelpful leak to the media, no-one is telling contractors what’s going on, when they can expect a solution and what form it might take.
Initial messages from the 2011 Budget and subsequent IR35 Forum meeting suggested that the original plan was to have a new system in place for the better administration of IR35 by the time of the 2012 Budget.
However, the most recent meeting due to take place on 18 January was postponed. And there has been no official word from HMRC about why and when the next meeting will take place. Time is running out for the Forum if it hopes to have a fresh framework to recommend to the Chancellor before his March Budget, and it seems unlikely that it will have anything to roll out in April ready for the new financial year.
The minutes of the most recent IR35 Forum in November 2011 were markedly different from previous communications and read relatively positively, suggesting that some progress was, at last, being made. It seemed as if contractors were starting to be told how their fate at the hands of IR35 might be determined.
Certainly the drivers for refreshing HMRC’s approach to the administration of IR35 have increased since the inception of the IR35 Forum in April 2011. According to the latest research from PCG, contractor numbers have increased by 12% since 2008, so you would think HMRC and the Treasury would want systems in place to cost-effectively generate taxes from them.
There are at least 160,000 contractors and freelancers in the UK workforce who are new to the contracting sector, and new to IR35. And these figures probably underestimate the true increase in the number of contractors: our readership has grown by considerably more than 12% in the last year alone, and only a part of that can be accounted for by greater penetration and an increasing investment in high quality content.
In the 2009/2010 financial year, there were at least 10,000 contractors who answered ‘yes’ to question 6 part B of the P35, thus considering themselves to be inside IR35 and who were making a deemed payment accordingly. That number had been stable since the previous year, which suggests a great many of the contractors entering the contracting sector since 2008 either consider themselves to be outside IR35, or – more likely – simply don’t know about it or don’t know enough to take it into account.
Existing and experienced contractors need clearer guidance and greater certainty. A new framework for the administration of IR35 is urgently needed, offering a set of unambiguous and consistent rules. Once those are in place, people who aren’t really contractors should pay tax like employees, allowing genuine contractors to focus on making a success of their contracting careers.
Contractors, and their service providers, need to quickly start getting answers from the IR35 Forum.