IR35 suspect 'fast-tracked' under off-payroll rules

The first state-run outfit to use next month’s ‘off-payroll’ rules for the public sector to force limited company contractors to prove they are outside IR35 - or face a speedy exit – has emerged, claims a contractor accountant.

In an online post, accountancy firm Orange & Gold said that, rather than following the worker-by-worker assessment implied under the rules’ guidance, a quango has intimated that every PSC contractor it uses is caught by IR35.

Reflecting on this “blanket approach”, the firm’s co-owner Jonathan Shellard regretted that, at this stage, there is no sign the quango has considered the relevant contracts, working reality or other factors affecting IR35 status.

Instead, its officials are demanding evidence of deemed salary calculation or payslips to demonstrate that IR35 has been applied, said Mr Shellard, referring to one PSC contractor represented by the accountant who is in receipt of the quango’s written demand.  

Although this approach is permitted under the guidance, it represents a sort of ‘fast-tracking,’ because such assurances should be sought by the public sector client only where the contractor is unable to demonstrate ‘low risk’ under the IR35 business entity test.

Seeming to ignore such an initial step, the quango has told the PSC that a discussion with its financial director is required (assuming IR35 or a deemed salary calculation hasn’t been applied), with the “threat of the contract being cancelled.”

“The rationale for this seems to stem from a reaction to Danny Alexander's paper in May, 'Review of Tax Arrangements of Public Sector Appointees’, added Mr Shellard.

“[But] there seems no indication at this stage of any consideration given to role, contract, personal circumstances, business structure or the other factors that influence IR35 status.

According to the guidance, which is yet to be confirmed by HM Treasury, a public sector client who is “not satisfied with the evidence they receive” from a PSC contractor they have approached for assurances under IR35, “may send [the contractor’s] details” to HM Revenue & Customs.

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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