Posted by Tax Innovations on 27 Sep 2011

IR35 Tax System ‘Completely Unnecessary’

The Office for Tax Simplification has said that the difficulties caused by the IR35 tax system are ‘completely unnecessary’, following a freedom of information request that revealed tax of only around £200,000 was recovered last year as a result of this controversial legislation.

IR35 Legislation

The IR35 legislation was introduced in April 2000 to reduce the avoidance of tax and national insurance contributions by those using intermediaries to contract for services rather than having a direct employment relationship.

The Office of Tax simplification has suggested that proposed reforms such as the merger of income tax and NIC systems could remove the pressure that the IR35 legislation imposes on the employed and the self-employed and thus render the need for the legislation as obsolete.

The government called for evidence on the potential merger of income tax and NIC’s in July 2011 and are intending to consult on the proposals later this year.

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