Navigate the IR35 maze with compliant accountants

Friday 1 August 2014

IR35 compliance has proven to be a challenge for many contractors since its introduction, largely due to a lack of clarity over how it should be applied.

Until recently the future of the legislation was also uncertain but we now know that it is staying. HM Revenue and Customs (HMRC) is ploughing money into it and we are increasingly seeing more reviews and stringent policing.

This means certain contractors are now at more risk than ever. However, it's important for the self-employed to note that there is nothing to worry about as long as they are receiving IR35 support from a compliant accountant.

Carl Henning, senior solicitor at Brookson, explained: "IR35 can be a pretty scary business if you're not currently receiving any compliance support but if you're using a compliant accountant you can put your mind at rest. The government has acknowledged that the legislation has it's shortcomings and has previously been lacking in detail, but they're trying to put this right. We're seeing more guidance become available and because we know IR35 isn't going anywhere, it's becoming much easier to plan and settle tax affairs."

The government recently released its response to the findings of the House of Lords Select Committee on Personal Service Companies, in which it made clear that there will be little change to IR35.

It also recognised the positive contribution the self-employed make to the UK economy and the value of personal service companies as a legitimate way of working.

However, the government did reassert that IR35 legislation is there to ensure employment income is taxed as such, preventing people from avoiding tax and National Insurance by wrongly using an employment intermediary.

To ensure IR35 works more effectively in the future, the government will work with the IR35 Forum to raise awareness of the legislation. HMRC also claims it will strive to change perceptions that it is targeting those who are genuinely operating through personal service companies.

In a bid to clarify IR35, the Frequently Asked Questions sections of HMRC's IR35 information site has been replaced by 19-pages designed to be simpler to understand.

It is split into six sections:  'Intermediaries legislation', 'How to work out if it affects you', 'How it applies to you',  ‘Deemed employment payment', ‘Contracts’ and ‘HMRC enquiries'.

The guidance addresses the new statutory extension of IR35 to 'office holders', which occurred in 2013. The administrative reforms of 2012 are also included.

"When IR35 applies responsibility for ensuring compliance with the legislation always lies with the intermediary," the guidance clarifies. "Clients and other parties involved in the arrangements - like recruitment agencies – are not liable to operate IR35."

At Brookson we offer IR35 support to contractors and in 20 years have never lost a review. With an IR35 review we will ensure you comply with tax and National Insurance obligations when you're working on long-term assignments. To do this we will look at the terms of your contract and your working practices.

By Victoria McDonnell

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