In yesterdays budget papers, somewhat buried, was the following:
“Personal services companies and IR35 – The Government is bringing forward a package of measures to tighten up on avoidance through the use of personal service companies and to make the existing IR35 legislation easier to understand. This will include HMRC strengthening specialist compliance teams, simplifying the way IR35 is administered, and consulting on proposals which would require office holders/controlling persons who are integral to the running of an organisation, to have PAYE and NICs deducted at source”
Anything to worry about? Probably not.
There has been no indication that a overall tightening of IR35 was due; indeed the noise from the Coalition Government and the Office of Tax Simplification in the last year or so has been to simplify and clarify IR35 to make it easier to understand. Of course, surprises do come in budgets, the original IR35 was one, yesterdays reduction in age allowances was another (“granny tax”), but mostly the major changes are leaked / trialled in other the national press – big policy things – or via the professional press and fora – smaller technical things.
What has been in the news of late is a handful of situations where senior operational management in public undertakings have been recruited via PSCs – Chief Executives, Directors of Finance and similar – and clearly this is behind the latter comment about “office holders/controlling persons”; its no surprise really – IR35 is about showing self employment, and how can a Director level person in a large organisation be self employed, it simply doesn’t fit on case law/employment status as its known. Theres been a clamour to “do something” about these situations, clearly this is it, and 99.9% of PSC users, in defined technical or consulting roles, won’t be effected.
As to “measures to tighten up on avoidance” and “make the existing IR35 legislation easier to understand”, one persons simplification is anothers loophole closed of course. However HMRC are probably mindful that many PSC users pay no attention to IR35 – we see this often on clients transferring into us who have been Incorporated by “specialist” accountants simply ignoring IR35 – which both negates its purpose and suggests some easy pickings for enquiry teams. For most PSC users who critically review their contracts and working terms there is probably – probably – little to worry about.