IR35 News
IR35 remains a topical issue for Contractors as they come to terms with the implementation and implications of the new legislation. However, what is IR35?
In the budget speech 1999 the Chancellor made reference to what he called "tax avoidance" by those operating through personal service companies - the detail of the measures initially proposed by the Inland Revenue were contained in their Press Release IR35 - the name stuck and the lobbying began.
Whilst there is evidence of a small number of abusers, the proposed legislation affects 100% of industry. It is ill thought out and fails to target the true miscreants. The revised proposals are far better than those originally put forward by the Inland Revenue. However, the Professional Contractors Group is still actively lobbying against IR35 along with Contractors, Agencies and
End-Clients to ensure that the true nature of contracts is recognised.
The Inland Revenue has issued guidelines indicating that the typical agency contract currently in circulation is likely to be caught by the new legislation. This is particularly true where the contract is for a period of one month or more and where the contractor cannot demonstrate a recent history of work having the characteristics of self-employment.
In reality, whatever the length of contracts, each will need to be considered on a case-by-case basis. This is because the decision on whether a contract will be caught or not will be based on a number of relevant factors: the contract, the substance of the relationship between the contractor and ultimate client and the underlying pattern of operation of the Service Company/Contractor.
In the meantime, unfortunately IR35 remains on the Statute Books in its present form. However, even if the judicial review proves successful, it is unlikely that any changes will be effective before April 2003 at the very earliest.
For the latest information on IR35 please feel free to explore some of the weblinks listed below:
