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Budget IR35 guidance could signal tougher stance

HMRC is planning to bring forward further guidance on when and how IR35 rules will apply to office holders and directors providing their services through limited companies.

Contractors and their accountants are anticipating that Budget paperwork will include the promised clarification for changes in the Finance Bill 2013. But some are already warning that the new approach could herald more restrictions on contractors and increased IR35 tax investigations.

IR35 has been a long-running point of conflict between the tax authorities and freelance workers. Last year the issue hit the headlines when senior civil servants and other high-ranking public sector workers were found to be using personal services companies to reduce their tax liabilities.

The government brought forward a new set of proposals to bring such “controlling persons” into PAYE, but December’s Autumn Statement brought a rare piece of good news when the government abandoned the proposals in response to criticisms that the measure would be ineffective and merely complicate the issue.

Tonmoy Kumar, Manager of the Accounts Department of ABDS comments:
“The draft Finance Bill 2013, published on 11 December will amend the IR35 rules to clarify that the existing provisions apply to office holders as well as employees. The amendment will bring many more directors who provide their services through personal service companies into the scope of IR35. It is clear that HMRC want to make IR35 more effective in attacking personal service company arrangements, and we should expect to see increased activity in this area.”

Still unhappy with the situation, the Professional Contractors Group (PCG) has written to Chancellor George Osborne asking him to use the Budget on March 20 to clarify the guidance for off-payroll workers in the public sector.

The PCG wants HMRC to clarify what roles would and what roles would not be considered office holders for the purpose of applying IR35.

A departmental spokeswoman said this week, “HMRC plans to publish further guidance shortly on the change to IR35 explaining exactly what it means and providing clarity about when it will apply.”

We, at ABDS, will keep you informed

If you are unsure and need any help and advice on IR35, Self Assessment, Corporation tax, PAYE, or you need to keep abreast of changes in legislation and how it could impinge upon your business, contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail:

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