New IR35 rules have been branded a "muddle" as experts warn they could damage businesses and self-employed workers in the UK. Susan Ball, partner at RSMUK, and deputy president of the Chartered Institute of Taxation, told the FTAdviser In Focus podcast this week that the new rule changes to IR35 were creating significant problems for both companies and individuals. She said: "How you determine status is really important, not only for the tax rules but also for employment law and the obligations that go with that. "It is a muddle, frankly. Even in court, judges are looking at the same facts and determining differently, so how is the man on the street meant to work out someone's status and get it correct?
"The question needs to be resolved so people can work out properly whether someone should be on-payroll or off. Everyone's struggling with this."
Chancellor Rishi Sunak's reform, which came into place this month, is designed to ensure private sector employers are responsible for assessing whether or not contractors need to pay income tax and national insurance contributions.
It is also aimed at preventing tax avoidance by “disguised employees” – contractors with permanent positions at companies without paying the same tax or national insurance as standard employees.
However, some self-employed workers fear that the changes will see the private sector take a risk-averse strategy and wrongly place contractors under the regulations.
Nimesh Shah, chief executive of Blick Rothenberg, agreed, lambasting the "woolly guidance" on HM Revenue & Customs' (HMRC) website and criticising HMRC's online tool that is the only one the Revenue is standing by to determine status.
He added: "It's a mess.”
Justin Small, founder of the Future Strategy Club, said the rule changes will impact entrepreneurship in the UK.
He said: "Genuinely they are concerned about paying tax at source. It cuts their direct income by 30 percent.
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He said: "We remain convinced that the IR35 changes that will be implemented will have a disastrous impact on business.
"Not just the self-employed themselves, but also on their clients and the wider economy.
"We have urged the Government repeatedly to reconsider these measures – therefore there was a little bit of hope that we might hear good news in the Budget – but we didn't, which wasn't entirely surprising.
"It is disappointing... we will not stop campaigning for a rethink on this. It's a bad policy that will be a barrier for those looking for work in the private sector."
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