IR35: Peers hear evidence from business groups

I wonder where the House of Lords inquiry into IR35 is heading. Peers on the personal service companies committee have now heard from HMRC and representatives of business groups, professional bodies and the Office of Tax Simplification.

Yesterday Martin Hesketh of Brookson, an accountancy firm providing services to contractors and freelancers, suggested that the IR35 legislation should be left alone. Where there was uncertainty, case law was providing the answers.

But representatives of the Federation of Small Businesses and PCG told peers that IR35 was unnecessary. Chris Bryce, chief executive at PCG, said the legislation was now “redundant” and should be abolished.

It is difficult to see IR35 being abolished without a major change in the tax and NIC rules. The continued absence of an NIC charge on dividends provides a major financial incentive for “freelancers” to operate via a company. But in recent years many engagers or “end user clients” have insisted on the arrangement in order to save employer NICs and eliminate the risk of a PAYE enquiry.

My report for AccountingWEB on the committee’s first evidence session last month is here.

My short Storify account of key points from yesterday’s session is here.

The Lords committee’s call for evidence (written evidence is invited by 31 December) is here.

See also Finance Bill 2014: New focus on control to tackle false self-employment.