PAC report on implementing IR35 reforms

The IR35 off-payroll workers’ tax rules aim to prevent workers and recruitment agencies from positioning an intermediary between engagers and workers to avoid or reduce the worker’s income tax and National Insurance contributions (NICs). Such workers would typically use their own personal service company (PSC) as the intermediary.

To prevent them doing this the original IR35 rules required the worker’s intermediary to pay tax and NICs through the PAYE system on amounts it received for the worker’s services. This requirement was initially communicated through an HMRC news release numbered IR35 and was included in Finance Act 2000 with effect from the 2000-01 tax year.

It is generally believed that compliance with the IR35 rules was poor in its early years which was perhaps not helped by the number of reviews opened by HMRC at only 1 166 in a peak year (2003-04) and just...