HMRC has released an Intermediaries Legislation (known as IR35) discussion document which outlines a framework for discussions with businesses about how it might be possible to improve the effectiveness of IR35. IR35 is the tax and National Insurance contributions legislation that may apply should you work for a client through an intermediary and as such it is an essential thing for anyone involved in contracting or the umbrella industry to be familiar with. The new document covers a rationale for change, options to improve rules and the steps required for reform. It also reveals agreement that the legislation which was introduced in 2000 “to tackle the avoidance of employment taxes by those who work through intermediaries” is not working effectively. This is because two workers in similar circumstances could still be paying vastly differently levels of tax. A further issue, according to the document, is that non-compliance is “significant” under the current rules and only a “small number” of those working through intermediaries (usually their own company in a personal service company role) are compliant. There were 265,000 PSCs during the 2012/13 financial year which represented a 65,000 year-on-year increase. HMRC has been asked by the government to overhaul IR35 because non-compliance is estimated to have cost the Exchequer £430m in NIC and tax last year and this figure is expected to increase if changes are not made. The government wants to tackle disguised employment by “levelling the playing field between those who are employed directly and those who would be employed directly if they were not operating through their own company.” Views about potential reform options with a view to developing a better understanding of the issues are being welcomed. You can read the discussion document online here.