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Less than 24 hours since the Government published the draft clause which would bring 'office holders' or those considered to be 'office holders' under the provisions for income tax purposes, the experts were already at odds over the impact of this new change.
Their views ranged from a minor tidying up exercise to possibly the end of freelancing for senior contractors. Shout99 provides a round-up of the views on offer, so far.
Far broader meaning - Lawspeed
Recruitment law specialist thought that the intention was to broaden the scope of the legislation to catch any contractor who is regarded by HMRC as supplied to a specific position within an organisation. As such, they saw it as a majpor strike by the Government against freelancers who operate through their own companies.
They thought this would seemingly cover any management role unless the role is purely linked to a project being undertaken by the contractor, where the client could appoint a successor. Particularly affected will be interims who by definition generally temporarily fill a specified position, and senior managers in charge of elements of the clients’ workforce or ongoing arrangements.
Adrian Marlowe, Managing Director of Lawspeed, said: “ Whilst ‘an office-holder’ would normally be regarded as someone holding a formal position such as a director or company secretary, under the income tax rules it has a far broader meaning. Such a person would certainly be caught but under the meaning in the Act on the face of it so would anyone appointed to any regular position in the client organisation wherever the position is not personal.”
“The new proposed rules are so wide that even contractors who work in non management positions other than for a clear limited purpose would be caught. Far from being a victory for contractors this appears to be a major strike by the Government against personal service contractors.”
Tidying up exercise - ClearSky Accounting
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Derek Kelly, managing director at limited company contractor accountants ClearSky Accounting, said: "This draft legislation serves to strengthen IR35, and reinforces the principle that someone who is part and parcel of a business will be deemed to be ‘inside’ the legislation.
“The focus on ‘office holders’, including senior post-holders such as anyone who manages a team or plays a key financial role in an organisation, follows HMRC’s announcement that it intends to step up policing of IR35.
“The danger is that the above measures could create unnecessary anxiety and confusion in the freelancing and contracting community.
”However, the fundamental fact still holds true: if you are a genuine contractor working for a range of clients through your limited company, and are not attempting to disguise employment, you have absolutely nothing to worry about.”
No great change - Bauer and Cottrell
Kate Cottrell from IR35 specialists Bauer and Cottrell did not see this as a great change for contractors. She pointed out that this put the tax and NI on an equal footing and said: "I would not be at all surprised to learn that many people were entirely unaware of the NIC deeming rules and that you could be caught for IR35 for NIC but not for tax."
Minor change - PCG
Freelancer group, the PCG, has not released a public statement reacting to the specifics of the draft clause. However, before it was published, the group said that HMRC had contacted them to assure them that 'this will be a relatively minor change to the legislation, extending existing rules covering National Insurance Contributions and office holders to apply with regards to IR35. This suggests that the measure is unlikely to affect most PCG members.'
Further information
Shout99 will be following this development closely and reporting all updates, reactions and analysis from the experts. You can keep up-to-date with this in our News on IR35 Section. You can also subscribe to free email alerts when new items appear in this section, so you won't miss out on any important development.
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Susie Hughes © Shout99 2012
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