The chief executive of umbrella company Parasol has welcomed the Chancellor George Osborne’s announcement that IR35 is to remain in place.

In documents released to coincide with yesterday’s Budget, the Treasury said that rather than scrapping IR35, it will be simplified and administered better.

Rob Crossland, chief executive of Parasol, says: “In the current economic climate, abolishing IR35 altogether was never a realistic proposition and so, for me, the first option put forward by the OTS (Office of Tax Simplification) was always a non-starter. Contractors tend to be a commercially minded bunch and I am sure this was widely recognised throughout the OTS’s consultation period.

“This decision to retain IR35 in its existing form, but with a commitment from HM Revenue & Customs to improve on the legislation and correctly enforce it represents the most beneficial to contractors.

“It’s a case of better the devil you know and at the very least all parties know where they stand. That is to say, contractors will know exactly how much tax liability they face and when payment is due.”

Martin Hesketh, managing director of contractor accountants Brookson, told Recruiter that due to the complexity of the issue it will take two to three years to find a solution.

Derek Kelly, managing director of contract accountants ClearSky Accounting, adds: “The government should be encouraging entrepreneurs and small businesses in order to allow the UK economy to recover and grow. It should be making it as simple as possible for those individuals who are willing to take a risk and strike out on their own.

“In addition, the uncertainly that the Agency Workers Regulations will bring in October will provide significant challenges for the industry to get to grips with. If sweeping changes were made to IR35 at this time then there could be mass confusion.”

However, Gillian Econopouly, the REC’s head of public policy, says: “The OTS conducted a thorough and wide-ranging consultation with representatives from across the small business sector. The outcome was a recommendation to suspend IR35, giving immediate simplification to the system, while wider-ranging reforms were developed. We are disappointed that the chancellor rejected this out of hand.

“The suggestion that abolition would lead to substantial revenue loss is hard to accept, as HMRC have never been able to provide clear figures on the income gained from IR35.

“As we recently warned, evidence from the Treasury Select Committee shows that HMRC are struggling to cope with their existing workload. It is difficult to see how they will be able to better implement IR35 with even more budget cuts on the way.”