IR35 review?

The Conservative and Liberal Democrat coalition recently published its joint programme for government outlining the agreements reached on key tax and business policies.

Among the measures introduced was a pledge to review IR35 as “part of a wholesale review of small business taxation”. The document said that IR35 would be replaced “with simpler measures that prevent tax avoidance but do not place undue administrative burdens or uncertainty on the self-employed, or restrict labour market flexibility”.

Other key tax pledges:

  • The personal allowance threshold will go up to £10,000 over the course of the next few years.
  • The increase in employer NI thresholds proposed by the Conservatives in their manifesto will go ahead.
  • Non-business capital gains tax rates will increase significantly to be close to the relevant income tax rate, with exemptions for entrepreneurial business activities.
  • Tax avoidance reforms to be introduced based on Lib Dem proposals.
  • Corporation tax headline rates to be reduced.

We say:

  • Don’t hold your breath for the abolition of IR35.  Whilst there may be some tweaking we don’t expect wholesale changes. 
  • Given the state of the economy we expect more bad news than good news in the tax world starting with the Emergency Budget on 22 June 2010.

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