Accounting Blog

IR35 Update

Amendments to IR35 (intermediaries legislation)

The government announced recently that the IR35 rules are to be changed to ensure that the legislation applies to office holders or anyone regarded as an office holder for tax purposes. This follows media criticism of public bodies using personal service companies in situations where it was not always clear that IR35 applied. Under existing rules, the IR35 legislation applies to someone acting in the capacity of a disguised employee and it has been argued that someone holding an office, such as a director or company secretary, may be outside the definition of “employee” and therefore outside the scope of IR35. The new rules, likely to be introduced from 6 April 2013, clarify that IR35 applies to office holders as well.

As currently drafted, however, the definition of office holder is fairly widely drawn and as well as  covering workers acting as directors etc, is likely to include any worker holding a client management role unless the role is solely linked to a particular contractor project. For example, an HR consultant who has operated in a consultancy capacity outside of IR35 for several clients is asked to provide personal cover for a client’s HR manager on three months’ maternity leave. On the basis of the new rules, that engagement could now be regarded as subject to IR35.

As ever, we will have to see how the new rules are interpreted in practice but we would advise any contractor taking on a client managerial role or office to seek professional advice.

We have worked for many years with the following employment tax specialists who have a depth of experience in advising clients on IR35 and related employment tax issues. Should any clients decide to have their IR35 position reviewed and seek advice around this complex area we have negotiated a discounted fee for Primus clients, this should be discussed directly with John Hill & Associates;

Arrangements made by intermediaries

  1. In Chapter 8 of Part 2 of ITEPA 2003 (application of provisions to workers under arrangements made by intermediaries), in section 49 (engagements to which Chapter applies), in subsection (1), for paragraph (c) substitute –

“(c) the circumstances are such that –

(i) if the services were provided under a contract directly between the client and the worker, the worker would be regarded for income tax purposes as an employee of the client or the holder of an office under the client, or

(ii) the worker is an office-holder who holds that office under the client and the services relate to the office.”


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