IR35 rules continue to complicate workers

Thursday 11 May 2017

The complexity of IR35 rules has left many self-employed professionals confused over what legislation applies to them. 

According to PRISM, the trade body for umbrella companies, there have been “at least a dozen” examples where HMRC officials wrongfully told contractors they were the entitled to particular expenses.

Crawford Temple, PRISM chief executive, suggested that the tax system was too complicated and many government officials were even encountering issues working out how the rules applied to people. 

Mr Temple explained: “This is the most recent change to the tax legislation affecting contractors and the mistakes being made by HMRC are causing confusion and further tensions across the market.

“This is more evidence, if any were needed, that the whole system of tax and employment legislation is too complicated for people to understand.”

In order to help self-employed professionals understand how IR35 applies to them, it is important to consult freelancer and contractor accountants, who can assess individual circumstances and provide specialist advice.

Even those who are completely new to the sector can benefit greatly from these specialists, who can help people to establish themselves and attract new clients. 

The Freelancer and Contractor Services Association (FCSA) explained that HMRC’s software is stopping freelancer and contractors who work through Personal Service Companies (PSCs) from submitting an online tax return. 

FCSA believes that HMRC’s software cannot compute how the dividend tax allowance influences other tax allowances, which is causing significant errors and making it harder for freelancers to work out their take-home pay. 

It is important that all self-employed professionals keep track of all their tax payments, or they could find themselves facing unexpected extra costs. By keeping printed copies of all invoices, you have evidence of payments and can challenge any mistakes. 

Julia Kermode, FCSA’s chief executive, said: “Once again the UK’s smallest businesses are being hindered and it appears that HMRC has no intention of resolving the software issue. 

“It is wholly unfair that individuals and their accountants will have to pick up the cost of this as HMRC’s failure will lead to an increased amount of admin, time, inconvenience and ultimately cost.”

Ms Kermode believes incorrect calculations from HMRC will lead to more fallout in the future. 

She described the situation as a “shambles”, speculating that the government’s inability to fix the issue could be as a result of the lack of capable contractors. 

By Victoria McDonnell

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