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What does the future hold for IR35 legislation?

Tomorrow (6th April 2017) will see the introduction of significant changes to IR35 legislation for public sector contractors, with organisations set to become responsible for determining a contractor’s IR35 status. For now, the rules for contractors in the private sector remain unaffected , and they will continue to be responsible for determining their own IR35 status.

So what might the long-term future hold for IR35 legislation and what kind of developments should accountants of contractors and umbrella companies be looking out for over the coming weeks and months?

Award-winning cloud accounting software provider FreeAgent recently brought together a panel of experts (including the FCSA’s chief executive, Julia Kermode) to share their thoughts on the future of IR35.

“There’s a lot of talk about the new legislation eventually moving to the private sector” Julia acknowledges, “and I’m really hopeful that that won’t be the case because I simply cannot see the private sector accepting these changes and accepting responsibility for determining people’s IR35 status… That said, I do think we would be naive if we didn’t keep an eye on whether it’s likely to come out to the private sector.”

Meanwhile FreeAgent’s founder and CEO, Ed Molyneux, who joins Julia on the panel, says: “I think the IR35 changes that are being implemented in the public sector are clearly motivated by the government looking at the idea that there is some kind of tax loss from people not operating and paying tax as employees, but as worker or contractors instead”. Ed goes on to reflect that while similar changes might also come into effect in the private sector in the future, “it will be a much bigger challenge for HMRC to introduce”.

Four accountants in practice – Johnny Leung of K&B Accountancy Group, Chris James of JSA Services, Neil Armitage of Umbrella Accountants LLP and Louisa Drewett of Aardvark Accounting – joined Ed and Julia to share their own views on the potential impact of tomorrow’s legislation changes.

Watch the panel’s discussion of the future of IR35 here >