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| CURRENT SECTION :: IR35 / IR591 | UK's most visited IT Contractor Site - 250k unique visitors March 2008 |
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Two-thirds of contractors put themselves more at risk from owing tens of thousands of pounds in employment taxes by not getting their IR35 status professionally verified. Half said that when it came to assessing their status under the law, they were better judges than professionals, and 13 per cent said there was no need to assess it at all. If they did seek advice, just one in four asked a legal or tax specialist while 10 per cent turned to a traditional accountant, says a survey by Shout99 for Brookson. The accounting firm’s chief executive Martin Hesketh advised contractors to be cautious if they approach a local accountant with a request to verify their IR35 status. Although it was a “positive” step to at get at least some professional help on the issue, he said that many high street accountants lacked the “necessary expertise or experience.” “IR35 is an assessment based on employment law, not on tax law or accountancy rules, therefore an employment lawyer is best placed to offer advice.” The survey’s headline findings were “cause for concern”, he added, as they show contractors’ “IR35 ignorance” is putting them at greater risk from hefty tax bills. Yet experts disputed with CUK whether being in the dark about IR35 adequately explains why so few of the contractors questioned took advice to reduce their exposure to it. Asked about the findings, John Kell, policy officer at the Professional Contractors Group, said it was unfair to suggest contractors were getting more ignorant about IR35. “I'm not sure it's fair to say that ignorance is growing, but we need to remember that people are moving in and out of contracting all the time,” he said. “Today's marketplace will contain a lot of contractors who were not around in 1999 and the early 2000s when…everyone was keeping very close tabs on the latest IR35 developments.” Addressing the newcomers, he urged limited company owners to form a decent understanding of IR35 and to then consider a professional review of each new contract. “Getting the message across to contractors that this is something they absolutely must do, on pain of a possible tax bill for tens of thousands of pounds, is a never-ending task.” But it is the contractors who ignore the message because they heard it and acted upon it once, a while back, who risk exposure the most, according to IR35 advisor Bauer & Cottrell. “An ‘outside IR35’ opinion given say three years ago may not be the same now,” said Kate Cottrell, the advisory’s founder. “I suspect that many contractors have relied upon opinions given in the past and have carried on regardless but this has its pitfalls, not least because as the case law goes through the tribunals [the] courts’ opinions change.” Brookson agreed, arguing because the law is “constantly shifting” it is “beyond many high street accountants” to invest the time and money required to maintain the level of expertise required for IR35. However Ms Cottrell challenged the firm’s charge that contractors are ‘IR35 ignorant’ by pointing out her caseload of “contract review work” has grown significantly in the last few months. “An analysis of our peaks and troughs show marked increases related to government activity. For example … when HMRC are targeting particular schemes under the avoidance legislation.” Ominously, there may be more ‘government activity’ early next month, when HM Revenue & Customs learns if Dragonfly Consultancy Ltd owes it £99,000 in employment taxes under IR35. Meanwhile, both the IR35 advisor and the accountant were unanimous that new laws for managed service companies further explain why so few contractors took professional help with IR35. Under the MSC legislation, providers had to stop reviewing their customers’ contracts, where previously they could assess them for IR35, and recruitment agencies had to stop giving advice. Mr Hesketh reflected that in the post-MSC world, the only step service providers can take is to advise customers of the risks they face of not getting their IR35 status vetted, by an appropriately experienced and qualified professional. Aug 22, 2008 Email this article Printer friendly page Previous Page
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