Brookson Accountancy and Enterprise Freelance Fair react to OFT report on IR35

Martin Hesketh, managing director of Brookson Accountancy and support services and Neil Lewis of the Enterprise Freelance Fair have both released statements in response to the interim report from the Office of Tax Simplification on the future of IR35.

  • Whilst welcoming some elements of the the interim report, Hesketh warned the suspension of IR35 could create more risk for self-employed professionals in the short-term. He added that more change should be resisted until the right medium-term answer is found.

“The OTS is proposing the integration of income tax and national insurance as a solution to the problems created in distinguishing between employed and self-employed individuals. This approach will only deliver the simplification of tax rules, it has set out to achieve, if self-employed and employed individuals are taxed at the same level.

The OTS is also proposing one rate of corporation tax, irrespective of company size.

We believe fundamental changes, as outlined above, will discourage entrepreneurship and enterprise, both of which are fundamental to driving growth of the UK’s economy. Self-employed individuals and small businesses should be nurtured in order to provide a distinct competitive edge for the UK‘s economy. The tax system has a vital role in this nurturing process.

From an IR35 perspective, the OTS has put forward three options for consideration – keep it, abolish it or amend it.  The fact all three obvious options have been suggested demonstrates there are no quick fixes to this area of legislation and there is certainly no consensus around the ultimate right answer. We believe the temporary suspension of IR35 would be the wrong move at the wrong time, leading to more uncertainty and increased non-compliance. It’s definitely a case of better the devil you know at this point and we believe the way forward is to hold IR35 as it is, until the full debate around the medium-term answer has been finalised.

At a macro level, we are very concerned by the OTS report that the drive for simplification may result in a tax system that is easy to understand and operate but also one that fundamentally undermines key elements of the competitiveness of the UK economy.

Overall, we are pleased to be able to add to the debate and represent the views of self-employed professionals. The key challenge must be to create economic growth and contractors and freelancers must play a vital part in this.’’

Neil Lewis said:

“IR35 has unfortunate and awful consequences that mean the flexibility of contract and freelance workforce is seriously undermined which is bit like houses – no liquidity in the housing market, no labour movement = low growth.

If low growth is what you want – fine – keep it.  If you seriously want growth – then let it go and make tax simpler for all – employees and freelancers. It is a classic case of do you penalise everyone for the bad behaviour of a few?”

Are you a freelancer affected by IR35 rules? Do you welcome the OTS report?

Let us know in the comments below…

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Written by Alistair Beech on March 14, 2011 and filed in Freelancers, Money, News , ,

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