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IR35 – Clients may be working with Inland Revenue to scupper contractors Author TreasureGuard Date 30/4/2004 Article: Serious Concerns Two recent IR35 wins by the Inland Revenue has left contractors with serious concern for their IR35 status and tax liabilities. Both cases have been won with the Inland Revenue putting forward significant evidence provided by the end client. For those who have not been following the cases of Inland Revenue against Usetech Ltd and against Future On Line Ltd, both these cases have been heard in the last month at the tax tribunal. In the Usetech case the agency issued the contractor with a supply of services contract – normally outside of IR35. Sub Contract Employees In this case, handled by Accountax, both the HR manager and the engineering manager of the client, ABB, gave evidence where the HR manager declared to the Revenue that from time to time ABB take on ‘sub contract employees’. Now, if the client is arguing that the relationship is of employment it makes it extremely difficult for the contractor to argue otherwise and the taxes of IR35 are imposed. Knowledge of the agency/client agreement must be gleamed by the contractor in making their status decision. In the second case, handled by JSA, the contractor lost his IR35 decision for services carried out at EDS. The Revenue were supported by evidence from an employee of EDS, Mr. Chris Elder. One of the principle conclusions was that the contractor had been integrated into the client under the direction of its manager, Mr Elder. Mystery Where there is some mystery, is why the client companies are indicating a relationship of employment with the supplier. Ultimately the client could have problems with holiday pay, pensions, unfair dismissal, etc if a relationship of employment can be found to be present. In addition to this, if the supplier’s costs and taxes rise this will ultimately have to be met by higher fees to the end client or by contractors going out of business and again increasing costs through lack of suppliers offering the services. It appears that the Inland Revenue is now approaching some larger users of contractors to canvas support for its IR35 approach. Sinister Approach TreasureGuard is factually aware of an approach to BT by the Inland Revenue. As with other clients, the current contractors and agencies should be made aware of their client’s position and canvas the client’s stance before making decisions on accepting further offers of work. Questions should be asked of all client contacts and encouraged to be raised higher up in these organisations. TreasureGuard Limited www.TreasurGuard.com Umbrella Companies | Personal Service Companies Company Set Up | Foreign Exchange | Contractor Insurance | Contract Search | IT Contract | Contractor Mortgages | Contractor Pensions | IR35 | Umbrella Company IR35 Advice News Jobs Money Forum

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