Office Holders
The Government made a recent change to IR35 so that office holders cannot be contractors. Or at least they can’t be taxed as contractors.
However, they didn‘t define who an ‘office holder‘ is in that legislation.
They have elsewhere, though and here is how they define it.
An Office Explanation
‘An office may be created by a charter, statute, or other document which is, or forms part of, the constitution of an organisation or which governs its operation.
‘For example, a director of a company is an office holder. That’s because the Companies Act requires a company to have a board of directors. Similarly all companies are required to have a company secretary. A Special Commissioner holds an office created by the Taxes Acts.
‘There is no statutory definition of ‘director‘ but the term includes executive, non-executive and nominee directors’.
So, that‘s the Board.
That‘s the end of those rolling contractors that the Chairman and his board of directors have while they siphon their money through Limited Companies.
HMRC Guidance
However, HMRC then go on to say ‘But not everyone who carries out duties specified by the law is an office holder.
‘A local authority has a statutory duty to collect refuse but a dustman does not hold an office.
‘On the other hand a Returning Officer does hold an office because not only the duties but also the ‘post’ is established by law’.
Office Holders Examples
Here are people that HMRC as holding office:-
– Clergyman
– Coroner
– chairperson or member of a Rent Tribunal, VAT Tribunal, etc
– Local Veterinary Inspector(LVI)
– sub-postmaster/sub-postmistress
As you can see they all hold official positions but don‘t necessary have someone working for them or have control of budget like a Controlling person.
An ‘˜office holder‘ looks to be different from a Controlling Person, then, which the Government defined as someone having ‘˜significant‘ control over people and budget.
Some of these would not be Controlling Persons under that definition.
HMRC Clues
Any more clues HMRC?
‘The appointment of a succession of individuals to a post or job title is not in itself sufficient to establish an office.
‘An office is a separate and independent position to which duties are attached; an office does not owe its existence to the incumbent or the discretion of an organisation.
‘For example, the post of manager of a factory or a head of division in an organisation is not an office because such a post will normally only exist as long as the organisation wishes.
‘It will not have the independent existence or endurance required to establish it as an office’.
Good News for IT Contractors
Well, that‘s confusing – but perhaps good news for IT Contractors.
If the head of a factory or the head of a division at a company is not an office holder then Project Managers and Team Leaders on IT projects would not be office holders, one would think, from that definition.
If the former are out then the latter must be out too.
The role only lasts as long as the project lasts.
Created by Custom
Any other clues HMRC?
‘An office can also be created by custom.
‘But if there is no written authority there must be a long-standing practice or unwritten constitution which makes the existence of the office clear’.
Everything clear now?
I don‘t think so.
When have HMRC ever published anything clear?
Clearly they like loose definitions which they can interpret and test in the courts.
Head of a Division
However, going on face value, and going by the clue about the factory manager and even the head of a division, it would seem as if contract Project Managers and Project Leaders would be outside of it.
What about those working in senior roles on Projects that are in Production, i.e. Maintenance Team Leaders?
Prior to reading this I would have thought they would have been caught.
However, like with the factory head and division head these are roles that only exist as long as the company want them to.
There is no statutory role here like the Chairman of a company.
It looks as if it has to be a role that is defined, often legally, which has a basis outside the company as well as inside.
Only Senior People
If this is the guidance used for Office Holder then it would seem to suggest that only the very senior people are caught by it and that all IT Contractors are outside of it.
But if that is so why did they make the change in the first place?
Was it just to stop those rolling contracts for people at a very senior level?
That‘s what this appears to be – but one is still cautious and nervous about HMRC‘s and the Government‘s motives for this.
Perhaps this was just to catch those senior statutory office holders.
However, this may just be the first skirmish as the Chancellor has said that he is going to strengthen IR35 – and he may not be finished yet!
