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IR35 News

From April 6th 2017, IR35 status for Public Sector Contracting will be determined by the client, not the contractor.

For more information on these upcoming changes visit Public Sector Contracting. You can also have a look at what the contractors and industry experts are saying about it in our Public Sector IR35 Forum.

If you are unsure of your IR35 status you can get an IR35 contract review. You can also cover your tax and IR35 risks with IR35 insurance.

There is further IR35 information below.

To send, or not to send, that is the question? Do you want to stick your head in the sand, spend the taxman's money and hope he doesn't catch you, or strip naked, cover yourself in honey and run into the tax office to be stung to bits. A tough choice my fellow entrepreneurs.

"You have a contract for the provision of your services to a client. It is not certain that it is a contract for services, but nor is it certain that it is a contract of service. Like many, perhaps most contracts, it may be more likely to be one than the other but you cannot be absolutely sure of its status. You don't want to assume that it is a contract of service because that means paying more tax, perhaps unnecessarily. But on the other hand you don't want to assume that it is a contract for services, and pay less tax, if that means running the risk of the Inland Revenue later demanding back tax, interest, and even, perhaps, penalties."

Employment Status in Relation to Statutory Employment Rights". The Government are seeking to establish whether there are categories of working people who are currently excluded from statutory rights who require protection.

In an open letter to the Paymaster General, the Professional Contractors Group has responded to a statement that it has been "totally silent on every issue over the past 12 months". Dawn Primarolo had made the comment when replying to an amendment put by the Shadow Chief Secretary to the Treasury, John Bercow MP, in which he called for special provision to be made over the training costs of those caught by IR35.

At the last budget, the Chancellor announced his plans to increase NI rates by 1% to help fund the NHS. The National Insurance Contributions Bill was finally passed on Monday, on its third reading. The opposition parties suggested a number of amendments to the Bill - including one which would exempt smaller companies from the NI increases. The proposed changes were rejected however, with Dawn Primarolo even managing to use the debate to once again defend IR35.

Will Heard of Investigations & Special Tax Services takes a swipe at the Revenue's supposed change of policy on granting dispensations to one person companies.

As was reported earlier in the month, the Inland Revenue has made a number of changes to its Employment Status Manual, which provides 'guidance' to inspectors on issues relating to an individual's tax and employment status. Typically, Revenue staff will use this guide to determine whether a contractors is caught by IR35 or not.

In response to suggestions made by the PCG, the Revenue has clarified some of the details in their employment status manuals, including the issue of duration of contract, provisions of equipment and the relevance of indicators of 'Being in Business on Your Own Account'.

Hundreds of small companies used as 'tax vehicles' by the UK's top footballers, and other high earners, could face fresh scrutiny from the Inland Revenue if David Beckham pulls off his much publicised wage demands from Manchester United.

David Houston of GlobalK, and a long time contributor to the Contractor UK site, looks at some of the popular misconceptions which surround contracting abroad. This is a revised version of the article for 2002.

The Professional Contractors Group has called on the Chancellor to use the Budget to help small businesses operate with confidence and remove the climate of uncertainty which currently blights the sector.

The results of a recent AccountingWeb survey have been published, suggesting that IR35 is causing practical problems for both those caught by the rules and their advisers, giving rise to mounting compliance costs.

Adrian Marlowe of Lawspeed says despite the Revenue winning the first few IR35 cases at the Special Commissioners, case law will eventually come to the aid of the contractor.

When attempting to draft a contract that falls outside the scope of IR35 it is very important to look at the nature of the work and to structure the work in the form of a project. Lawspeed like many other advisors place significant importance on the work and therefore the contract being project-based if an engagement is fall outside the scope of IR35. This is for a number of reasons.

In its Budget Submission, the Federation of Small Businesses which represents over 160,000 companies, has called on the Chancellor to immediately repeal IR35.

Make sure you identify and report all of the travel and subsistence costs relating to your IR35 contracts that were paid in the year ending 5 April 2002.

For personal services companies with a financial year ending on the 31 March 2002, there are precious few tax planning tips one can give to minimise the impact of IR35. <br/>
Of the few tips that do apply, in order to be effective they must all be carried out before the end of this month. So you have little time left to consult your own accountant and make sure you are properly prepared.

These deadlines apply to contracts caught by IR35. If you are unsure as to whether or not IR35 applies, you should seek professional advice.

Lime IT, an IT contractor company who has been fighting to elude the clutches of the IR35 legislation, has seen another twist in its long story - the Inland Revenue recently 'failed' Lime IT's application under the IR35 rules, and as a result, Accountax (who are handling the case) have applied to have the case heard before the Special Commissioners.

The Inland Revenue has updated its IR35 'Computation' FAQ's and has confirmed that it has extended the 'penalty concession' for the current tax year, as long as certain conditions has been met.

The Professional Contractors Group, who has led the legal fight against IR35, has decided to abandon its Judicial Review action and focus its efforts on case law.

On Monday, the Paymaster General revealed the amounts paid to members of the public who 'provided information' to assist the Revenue in their tax-raising efforts. The amounts are surprisingly small!

Adrian Marlowe of Lawspeed looks at the issues facing professional contractors now that the Judicial Review Appeal has failed and what should be done to defend IR35 status.

Official response from the Revenue following their victory in the IR35 Judicial Review Appeal.

In the Court of Appeal today, the 21 December 2001, IR35 has undoubtedly become entrenched in the statute books.

The Professional Contractors Group vowed to continue to campaign against the so-called knowledge-tax, IR35, by increasing its pressure to drive through relevant case law and forge stronger links with clients and industry bodies.

'We would urge the government to scrap IR35'...<br/>
This is just one of the conclusions of the British Chambers of Commerce (BCC) taskforce report which contains ten recommendations for Government on what small business really needs in order to drive forward the UK's own e-commerce revolution.

Keeping up a 100% success rate in appeals against adverse Revenue contract opinions, Lawspeed have reported that that they have now persuaded the Revenue that the arrangements of two further contractors, one engaged on the same client site for 3 continuous years, and the other for 5 years, are not caught by IR35.

Following a recent announcement, the Government is to suspend the 'Individual Learning Account' scheme from December 7th. The official line is that the scheme has been abused:

In scientific research a theory is first suggested that seems to fit the observed facts. It is impossible to prove it correct, so scientists set out to see if they can disprove it. The theory is modified the moment it is shown the theory doesn't match a given set of circumstances. The theory gains credibility as it becomes harder to disprove.

Comprehensive analysis of the recent EAT ruling in which a contractor was found not to be an 'employee' of his client company, despite meeting many standard measures of 'employment' as per the standard 'employment status' guidelines.

The Professional Contractors Group has announced it will carry its legal fight against the Government and its so-called stealth tax, IR35, to the Court of Appeal later this year.

The Inland Revenue has told its tax inspectors they must find more than three-quarters of the individuals or businesses they investigate guilty.

Following her pre-judgement 'verbose filibuster' at Treasury Questions a fortnight ago, the Paymaster General, Dawn Primarolo was once again answering IR35-related questions on Thursday 5th April.

Although the all important judgement will determine the fate of IR35 next week, few can deny the drama of the last week's proceedings in court. Having never followed a legal case in such depth before, I was particularly impressed by the wit which flowed readily from all sides involved in the case. So by means of light relief, here are my 'Top lines' from the last week's proceedings:

Judgement in the PCG vs Inland Revenue Judicial Review case was handed down in the High Court on Monday 2nd April. The application by the PCG was dismissed and IR35 remains in place.

In time honoured fashion, the Paymaster General has once again been defending IR35 in Westminster. In Treasury Questions on 29th March, she was accused of delivering a 'verbose filibuster' after mis-using one of Contractor UK's articles to justify the IR35 legislation.

Shows how contractors have been affected by IR35 and what action, if any, they have taken to address the legislation. Over 500 contractors took part over a 10 day period in early March 2001.

Whilst we all await the IR35 JR judgement next week, our latest survey results, run in association with shows how contractors have been affected by IR35 and what action, if any, they have taken to address the legislation. Over 500 contractors took part over a 10 day period in early March 2001.

Whilst we await the outcome of the Judicial Review, the end of the tax year is approaching and it would be unwise to presume that IR35 will disappear." - Adrian Marlowe, Managing Director of Lawspeed looks at engagements under IR35 and asks who is the client?

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