What is happening with IR35 reforms?

The IR35 reform has proved to be a controversial issue and speculation and rumours have been rife in the run up to the Autumn Statement. However, the spending review turned out to be an anti-climax and almost nothing was said about the intermediaries legislation.

The result is that we are all still left speculating about who will be affected by IR35 reforms, but the Chancellor did offer one clue about what can be expected when they finally finish pouring through the consultation and come to a decision.

In section 3.20 of the detailed document for the Autumn Statement, the Chancellor confirmed plans to restrict tax relief on travel expenses would be pushed ahead in April. However, the document also adds, “Following consultation, relief will be restricted for individuals working through personal service companies where the intermediaries legislation applies.“

The consultation on IR35 reforms proposed that where a contractor was subject to supervision, direction and control (SDC) then they would be prevented from claiming tax relief on expenses incurred in travelling to an end client site and also subsistence associated with those visits.

The concern for Danbro and the wider industry was that the focus of the reform concentrated solely on the control test and not on the entire tests of employment status.

The Government has said it is still considering responses to that consultation and we will now have to wait for any potential changes in the future.

Danbro managing director Damian Broughton says, “Put simply, we’re none the wiser about potential reforms to IR35, but we can draw two conclusions.

One is that HMRC intends to boil down IR35 to one simple SDC test. They do not have the resources to police this sector and that could be an easy option for them. We’ve been promised a full consultation on any changes, but the HMRC has form for carrying out discussions when a decision has already been made.

The other option is that the Government has listened to industry concerns and decided one simple SDC test is unfair. If that’s the case, they will have to consider a range of employment status tests and the future of IR35 remains undecided. This may explain the delay on an expected decision.

Ultimately, it means contractors can relax for the time being and we’ll keep an eye out for any further developments in the future.”


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