Contractors should not be pursued for IR35 so readily

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Pursued for IR35

Should contractors be pursued for IR35?

The Office of Tax Simplification has finally made its recommendations to the government. So, we may see some of these recommendations in the Budget. They will come into effect from April 6th.

A major recommendation is to stop the system where currently they could rule that contractors are outside IR35 on one contract and inside on the next and then outside again on the next.

That was always a major grudge for contractors.

Disguised Employees

The OTS is recommending that HMRC don‘t worry too much whether each contract is inside or outside iR35. They should look at a contractors‘ normal way of working.

They basically want to catch people who are operating personal service companies but who are really disguised employees.

Perfect examples of this would be their own acting CIO and acting head of HR, who were permanent employees of HMRC one day and contractors with limited companies the next.

This is the type of disguised employee that IR35 was set up to trap.

Real Contractors

If the recommendation is accepted by the Government, those lifestyle contractors who go from place to place, and who are normally outside IR35, won‘t be pursued.

It will be accepted that they are in business on their own account, That’s even if not every contract they take fulfils all the criteria.

Those who stay at companies for a long time may well be looked on as disguised employees, though.

Staying at one place may be seen as a lifestyle choice. So the whole way of working during that period will be looked at.

However, those who flit from place to place will be more likely to be looked at as genuine lifestyle-choice de facto contractors. This is despite the working practices on individual contracts.

Sensible

This makes a lot of sense.

It will be interesting to see if the Government acts on the OTs recommendations.

They acted on the OST recommendation that IR35 should be kept. So, some people are saying that this shows a precedent.

However, this recommendation is going in the opposite direction from that one. So we‘ll have to wait and see.

It would be better if they didn’t purseu contractors so readily over IR35.

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