The introduction of IR35 in April 2000 had two clear benefits:
- The removal of a tax loophole resulting in billions of lost revenue to the Treasury
- Establishing a framework to remove the ambiguity of employment status and create a fairer tax regime for the contracting sector.
The benefits of extra billions invested into public services are an obvious benefit to the whole economy. Tax avoidance will not disappear now that IR35 has been introduced. However, the problem of tax avoidance within the contracting sector during the 1980s and 1990s was getting so acute that the Treasury had to take action.
In the same way that tax avoidance will not disappear because of IR35, so the confusion about whether contractors are employed or unemployed looks likely to be with us for some time to come.
Although the case law has so far been slow to set precedents, the tools used by both HM Revenue and Customs and the Courts to determine employment status are being thoroughly tested and examined. This is also a clear benefit following the introduction of IR35.
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