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IR35 review may be wide-ranging

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The Office of Tax Simplification (OTS) may extend its review of the IR35 regime to include other aspects of the relationship between sole traders, firms and employment status.

In an interview, John Whiting, the policy director at the Chartered Institute of Taxation (CIOT) and a prominent member of the newly appointed OTS, said that nothing on IR35 had been ruled in or out.

While agreeing that the IR35 system lacked effectiveness, Mr Whiting conceded that the regime had been implemented in order to deal with genuine abuses and that the simple abolition of IR35 could lead to the reemergence of some of those breaches of the law.

He said: “If we’re going to make any serious progress we should look at the whole thing. Does that mean looking at the whole subject of sole trader v employee v company? Yes, it possibly does.

“What I don’t want to do is add another bit of sticking plaster to what is already quite a ramshackle structure.

“I don’t want to rule anything out or anything in at this stage, but we need an overall look at this. As far as I am concerned, IR35 is not very effective and we need to look at what gives rise to that. For all the hot air it generated, there were real abuses that IR35 was meant to tackle. If it were abolished, they could come out again. Maybe people have to accept that if we simplify to make things easier, it may make some of the edges rougher.”