IR35 Umbrella Company

The IR35 Umbrella Company relationship goes back a number of years. IR35 is now 13 years old. That is unlucky for some. The Conservative Party promised the Professional Contractors Group that they would ‘look at’ IR35 again when they came to power. The PCG saw that as a great sign of hope. Surely the party of business would see the light and abolish it. The Conservatives were a bit devious there. They allowed the PCG to believe that there was a good chance that IR35 would be abolished once the Conservatives came to power.

However, it was noticed by some commentators that the Conservatives had not promised anything specific. It was more nods and winks. They didn’t actually say that they would abolish it. All they said was that they would ‘look at’ it again. Some commentators saw this more cynically than the PCG.

IR35

When the Conservatives came to power they were as good as their word. They did look at IR35 again. Indeed they set up a panel to do so. The PCG were part of the process. What the panel said, though, was not what the PCG and contractors wanted to hear. What the panel said was that there was a danger that, if IR35 was abolished, contractors would simply dump their umbrella companies and go back into Limited Companies.

The panel saw that as a bad thing. This would mean less tax coming into the coffers of the Government. The panel recommended that IR35 be kept. The Government accepted the verdict of the panel. They took on their recommendations. The IR35 Umbrella Company relationship would remain.

However, the Government went even further. In the last budget Chancellor Osborne said that the government intended to STRENGTHEN IR35. That must have come as a huge shock and hammer blow to the PCG. The Chancellor announced that 36 new IR35 Compliance Officers would be hired. They would be split into three teams in Edinburgh, Salford and Croydon and would chase contractors for IR35 tax.

This was not an outcome expected by the PCG prior to the election. However, the Government saw this as advantageous to themselves in terms of the tax take.