Intermediaries Legislation (IR35): discussion document; HMRC are openning a discussion in order to consider how the intermediaries legislation "IR35" can be improved.


IR35 operates to tackle disguised employment. It applies where an individual contracts for work via an intermediary, such as a company, and performs employee-like services for an end client: the worker is effectively an employee, IR35 taxes the worker, via his intermediary as if he were an employee, however the worker acquires no employment rights.

The government feels that in its current form, there is a widespread issue of non-compliance. HMRC has not had the resources to investigate cases and the new offshore intermediaries and agency legislation has had the effect of encouraging even more self employed workers to provide their services via their own service companies.


The governement has two key aims:

  • The need to protect the Exchequer; and,
  • 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.

The document also stresses that making the legislation straightforward would be a core objective.


The document outlines some options for improvement:

  • Improving administration of existing legislation
  • Increasing enforcement
    • Requiring engagers to consider the status, including introducing a simple to use test. So that engagers are required to take a greater role in ensuring that the right amount of employment taxes are paid. Under such an arrangement, those who engage a worker through a personal service company would need to consider whether or not IR35 applies, and, if so, deduct the correct amounts of PAYE tax and NIC as they would for direct employees.

HMRC are looking in particular at the last option and as such are seeking respondents views on this whilst also inviting comments on how changes could be kept as simple as possible.

The discussion will run until the end of September 2015, and the document can be viewed here


  • The starting point from HMRC's perspective is that it is unfair that two people doing the same job, in the same way, can end up paying very different levels of tax depending on how they are engaged.
  • The starting point from the owner managed business owner's perspective is that an employee is not only guaranteed work and payment but benefits from substanital benefits and protection under employment law and so why should he not have a tax advantage to compensate.

HMRC note that this is a complex problem and it could be unfair for those who are genuinely self-employed. It will be interesting to see what comes out of the discussion.