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The government has responded to the recently produced report into the use of personal service companies. IR35 will not be abandoned but will be continue to be tinkered with but it is not clear how. The government and HMRC, it seems, continue to be unclear as to just how much IR35 rules “protect” the exchequer but it is clear that the government accepts that the £0.5 billion HMRC estimate is broad brush and depends critically on the assumption about at what income level an individual may consider incorporating. The government response states:
“The main areas of uncertainty in this costing relate to the salary levels at which individuals would incorporate and the number of directors who would change their remuneration strategy in the absence of IR35. Emerging evidence, including that provided to the Committee by HMRC in arriving at the IR35 costing, indicates that those on lower salaries are incorporating and that the salary bracket used in the calculation for employees could therefore be further expanded.”, and
“HMRC will publish during autumn 2014 an updated administrative impact assessment note setting out the current administrative costs which taxpayers incur in dealing with IR35.”
It looks like it’s more of the same as regards tinkering with the IR35 tax rules.