A Pre-Budget Glance at IR35 Legislation

IR35 has been the bane of many contractors’ professional careers since its implementation back in the year 2000. Many limited company individuals are anxious as to what the future holds for the legislation’s laws, HMRC being infamously mysterious about upcoming amendments and changes. What with the next budget looming ahead, and George Osborne no doubt already polishing his red briefcase, the contracting community has taken to the internet to share their views on potential changes that may or may not lie ahead.

The IR35 legislation has seen its fair share of controversy, when it was first introduced it targeted a substantial amount of limited company professionals, but throughout the years then dwindled in numbers of investigations carried out and revenue activity began to quiet down. There was even talk of abolishing the legislation and the laws around IR35 altogether following years of little activity and a severe drop in enquiries, and for a time it seemed as if the government had lost interest in the state of contractor tax.

That was until last year when it was announced that IR35 was in fact going to be strengthened. In his last budget, the Chancellor announced that they were not going to abolish the legislation, and by strengthening it they would again clamp down on potential disguised employees and contractor related tax avoidance.

This reignited fight against disguised employees began with the recruiting of a 36 man IR35 Compliance Team based in Salford, Croydon and Edinburgh, and at a time of massive layouts at HMRC, showed that the tax office was going about combatting IR35 with full force. In the months that followed, IR35 once again became a hot topic within the professional communities, the long awaited Business Entity Tests emerging back in May and the IR35 forum bringing with them the inevitable complaints and queries marking a turning point with HMRC to contractor communication. Later in the year, HM Revenue & Customs finally made their first change to the IR35 rules since 1999, announcing that ‘office-holders’ technically could not be contractors. In true HMRC fashion, this announcement was met with a barrage of questioning and scrutiny by us professional folk of the UK, Twitter and forum posts being the forefront of a puzzled and worried contracting debate.

With the next budget due to occur on Wednesday the 20th March, it is expected that George Osborne will no doubt announce further decisions to strengthen IR35, and all the nation’s contractors can do is wait and see what lies in store.

To find out more about what the 2013 budget will bring, visit HMRC’s Budget 2013 official page.