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| CURRENT SECTION :: IR35 / IR591 | UK's most visited IT Contractor Site - 250k unique visitors March 2008 |
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Contractors were yesterday urged to swallow the cost of professional advice about each and every one of their assignments as a sweeter pill than an IR35 investigation. Getting a qualified advisor’s take on their employment status for every role they undertake should not only be sought by the contractor, but also obtained in writing. “It is all too easy for busy contractors to see this area as extra hassle and ‘take the risk’ on their employment status,” warned Martin Hesketh of accountancy firm Brookson. The appeal of Dragonfly Consulting, he said, at the High Court last week is proof enough that contractors need to be ‘constantly vigilant’ about their employment status at work. “Despite the huge legislative shifts the contracting industry has experienced in recent times, the IR35 legislation remains key for self employed contractors in determining employment status,” Mr Hesketh said. “With this in mind, we would urge all contractors to ensure they have obtained robust and documented professional advice for each of their assignments.” Not only can expert advice help contractors steer away from an IR35 probe ever arising, but also their input can make contractors more confident if their status is scrutinised. In a recent contractor appeal case against IR35, which was dismissed, experts doubted the preparedness of the appellant because he gave up incriminating details to the Revenue. The nature of these disclosures convinced the Special Commissioner that the contractor was, in effect, directly employed; similar to how Dragonfly’s owner was deemed a "professional employee." “These types of Special Commissioners’ decisions illustrate the dangers that exist, and the potential costs involved,” of foregoing impartial advice about employment status, Mr Hesketh said. “Demonstrating self-employed status is the key to enabling those contractors who want to run their own business to genuinely safeguard all of the benefits that this way of working can bring.” But unfortunately for contractors, pillars of case law they once leaned upon to avoid falling foul of IR35 are no longer set in stone because the High Court is yet to rule on Dragonfly. “If the judgement of the Special Commissioner is allowed to stand,” said the PCG, which is funding the appeal, “a lot of contractors will have to look at their situation very carefully as the steps they have taken to stay outside IR35 may no longer be valid.” John Kell, the group’s policy officer, said the PCG decides which IR35 appeals to support based on whether their legal advisors see those cases as “winnable.” “That’s the biggest single point in a case’s favour,” he said. “The fact that this case [Dragonfly] is potentially significant, in that if it is allowed to stand then the usual defences against IR35 may no longer work, was also a big factor”. The PCG, which wants the government to debate employment status, has not been contacted by Alternative Book Company Ltd, which although not a PCG member, also lost its appeal against IR35. “The case has no wider implications and seems to have been settled pretty conclusively,” Mr Kell said. “So, subject to any request for help and legal advice that the case might be winnable, we have no plans to fund an appeal.” Proving that employment status remains a live issue, the Revenue yesterday unveiled a new checklist aimed at helping workers decide whether they are employed or self-employed. “Your employment status is not a matter of choice,” HMRC emboldened in the new fact-sheet ES/FS1, entitled ‘Employed or self-employed for tax and National Insurance contributions.’ “Your employment status is based on the terms and conditions of the agreement you have with who you work for. They are responsible for making sure it is correct.” Despite the poke at employers and end users of contractors, the Revenue ended the guidance note by squaring responsibility firmly with the worker. “You may choose, or be advised, to provide your services through a Company or Partnership,” HMRC said. “If you provide your services in this way then you will need to know whether the Intermediaries legislation (also known as IR35) or Managed Service Company legislation applies.” The updated leaflet follows the taxman’s launch of an online employment status tool and the bedding down of anti-avoidance tax laws for managed service companies. Jun 18, 2008 Email this article Printer friendly page Previous Page
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