Review of IR35 'long overdue'

3 August 2010

The IR35 regime requires a comprehensive review, the Recruitment and Employment Confederation (REC) has said.

The government has already suggested that IR35 will form part of the examination of the business tax system that is to be carried out by the Office of Tax Simplification (OTS).

IR35 legislation was introduced in 2000 to counter avoidance of tax on employment income where workers receive payments from a client via an intermediary (usually a personal service company) and the relationship between the worker and the client would otherwise be one of longer term employment.

In a letter to the chairman of the OTS, the REC urged that the review look at alternative legislative approaches to IR35, which has attracted controversy since its implementation.

Jeff Brooks, chair of the REC's Technology Group, said: "Over the coming year, the work of the OTS will have huge implications for the contractor market place. Specialised recruiters in the IT and technology sector are in daily contact with contractors and have regularly flagged up the challenges that current taxation requirements create.

"We will be working constructively with Government and with the OTS to feed into the forthcoming reviews and to help streamline the current tax regime for those operating in our market."

Paul Botting, chair of the Interim Management Association, added: "A review of IR35 is long overdue and will help to simplify flexible working options such as interim management.

"Interim executives and managers are key drivers for both growth and efficiencies and should not be stifled by an overly complex tax system. The voices senior interim managers and their providers must be at the forefront of the debate over the coming year."