The government wants to clamp down on abuse of IR35, particularly in situations where people would have been employees if they were providing their services directly. It believes that this contravenes the IR35 anti-avoidance legislation, which was introduced in 2000 and requires that contractors and freelancers pay broadly the same tax and national insurance as other employees.

The Budget document states: ‘As highlighted by reports from the Office of Tax Simplification (OTS) and the House of Lords, it is clear that IR35 is not effective enough. Non-compliance in this area is estimated to cost over £400m a year’.

The government has asked HMRC to start a dialogue with business on how to improve the effectiveness of existing IR35 legislation. The government wants to find a solution that protects the Exchequer and improves fairness in the system.

HMRC is due to publish a policy paper on the future of IR35 this summer setting out a framework for discussion.

This will also draw on the expertise of members of the IR35 Forum, which was set up in 2013 to improve the workings of IR35 and includes taxpayer representatives and professional advisers with expert knowledge and experience of how the legislation operates in practice and how it affects key taxpayer groups.