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IR35 April 2015 new regulation

The Employment Intermediaries Legislation, colloquially known as the IR35 is coming under pressure. The addition of reporting legislation coming into force from April 2015 may go a long way to rectify the overbearing process currently in place, but what do these new additions mean?

The new work legislation

Essentially, the new legislation means that agency workers and umbrella agencies will now only be affected, if it can be proved that Supervision, Direction and Control (SDC) does not apply to them. In other words, if a worker is found to be subject to SDC, they must be reclassified as an employee, although the new regulation makes it far more difficult to actually prove or enforce this.

The aim of the legislation is to combat ‘false self-employment’ by increasing the amount of information that a self-employed worker must divulge in order to maintain their status. However it is well known within the industry that the original drafting of the regulation was overly stifling to an industry that runs on flexible working patterns.

Why they had to set up Supervion, Direction and Control (SDC)

It was expected that the IR35 was to bring in over £220m per year in National Insurance alone, but in reality it has brought in (on average) a mere £1.5m per year – 0.68% of the total amount expected. [1]

The key issues with this particular tax legislation are two-fold. It attempts to regulate an industry that is by its nature built on flexibility, meaning that contractors who decide to sub-contract their project out to another would be required by law to report on said sub-contractors information. Further, it has proven itself, through many years, to not be fit for purpose.

In essence, the IR35 becoming extinct is a moot point. It never progressed to more than an annoyance to agencies and their contractors. In reality ‘Reporting Requirements’ starting in April 2015 are synonymous with the plaster/axe-wound metaphor – too little, too late.

The new regulation’s goal

The IR35 has long been recognised within the industry as not only ineffective and unfit for purpose, but actually hindering business practices.  [2] The introduction of the reporting requirements, whilst advertised as an extension to the IR35 process, would in fact make the regulation far more streamlined, and easier for agencies to work with.

The onus of the new regulation would fall directly under Supervision, Direction and Control (SDC), meaning that IR35 can be easily avoided, provided that SDC does not apply. 

Essentially, IR35 is a regulation unfit for purpose. This new regulation is an attempt at fixing what should realistically be rebuilt from the ground up. The sentiment behind the creation of IR35 is a good one, though by introducing such stringent measures to protect contractors from being taken advantage of, the regulation has made it more difficult for the vast majority of those affected by it. 

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