After a decade of what has been considered by many to be an extremely unfair and complicated tax law, the new UK government has promised to review and replace the IR35 legislation.
IR35 was first implemented in 2000 as a way to close a tax loophole which allowed contractors to pay reduced tax and NI by offering their services through a limited company. In some instances, contractors were on permanent contracts or recurring contracts – basically working full time for a single employer. This was viewed by the governement as tax evasion, and IR35 was introduced. Unfortunatley genuine contractors were also placed under IR35 legislation, effectively treated as tax evaders and taxed heavily on their freelance income.
“It would be great to see this piece of legislation removed. It created an enormous amount of confusion, and was never the viable solution it was intended to be” says Raymond Ridgeway from 1st Contact Umbrella.
“The government has said that it would “seek to replace it [IR35] with simpler measures that prevent tax avoidance but do not place undue administrative burdens or uncertainty on the self-employed, or restrict labour market flexibility.”
A clear cut piece of legislation will help hundreds of thousands of contractors to know and understand where they stand with regards to their tax. Businesses like 1st Contact Umbrella will also be able to to provide consistent, clear-cut answers to their clients. We look forward to seeing what happens and welcome the change!”