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Confused about IR35?

22 Aug 13 - 12:00AM Skills Alliance  | Malcolm Silander blog

It is undeniable that the rules in and around IR35 can be confusing. Even the Professional Contractor’s Guild has asked for a judicial review into how the IR35 legislation has been handled for their contractors, in an open letter to his members Chris Bryne called for change. Read about this here.

Taking Advantage

Unfortunately, beyond the confusion there are those who are arguably taking advantage of a lack of clarity, adding to the confusion for their own gain. You’re likely to have heard discussions at conferences or viewed online forums about ‘IR35 experts’ whose hard and fast rules will ensure your compliance and business security. In truth, the grey areas of IR35 are just that and either vague threats of HRMC pursuit or strict rules to ensure adherence are purely opinion. Ask yourself, who benefits except those guaranteeing the advice? Is it the Ltd Co. that turns down a contract extension? Is it the business that terminates its relationship with a business critical consultant? Or is it the profiting IR35 expert?

Operating as a Ltd. Company

This may offer savings in terms of taxes but exposes the consultant(s) to the risk of unemployment and lost earnings. This flexible workforce is crucial to many companies and the overall economy, especially in such challenging times. This area of flexible working needs to be protected for everyone’s sake. So, consider the facts:

1. The HMRC test, here, is a guide, only a guide.

2. No company has ever been fined. Even when the HMRC successfully pursued a case for hiring a limited company consultant, the business was not punished.

If you operate as a Ltd Co., or if your business hires limited company consultants, then be aware before committing to drastic or expensive programmes to ensure IR35 compliance.

The solution

In our opinion it would ideally be a government led initiative in partnership with industry leaders to create clear, simple to follow guidelines. Perhaps even to encourage a system where a consultant or company can have on-going, open discussions with HMRC about the status of their relationship without fear of putting their head about the parapet.

Failing this, ignore the hype, seek multiple sources of advice and be aware of IR35, do not fear IR35. Keep calm and carry on contracting.

 

Have you had issues or worries about IR35 and the lack of clarity? What would be your suggestion on how best to deal with this problem?

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